Sexual Harassment: How Should Witnesses Respond?

Victims and witnesses of sexual harassment often feel robbed of their sense of safety and peace of mind. After all, when someone is sexually harassed in an overt and physical manner, an actual assault and battery may have occurred. Sexually harassing others is a coward’s game, arguably born of narcissism or self-hatred – coupled with a desperate grab for perverse power.

However, many eyewitnesses aren’t sure what they should do. Some of them worry that if they simply turn away and pretend they didn’t see anything, they may be enabling the abuser. Yet how can safety be restored when no one will report these offensive acts? Fears of retaliation and other related issues are discussed further below.

Few people ever “win” in these situations — even employers often feel trapped since they have a duty to maintain safe work premises.

What Do Co-Workers Fear Most When They Witness Sexual Harassment?

Several studies and surveys have revealed that victims of sexual harassment – and those who witness it – often fear the same repercussions. Their most common concerns are set forth below.

  • Public or private shaming of the victim (or witness). Harassers often enjoy the turmoil they know they’re creating for others. In many ways, they’re like arsonists who take an initial pleasure in both setting a fire and then watching from afar to see everyone scurry around trying to minimize the damage.
  • Retaliation. While American laws exist to minimize the effects of retaliation, the fact remains that, once a harassing party decides to “silence” an accuser or witness, that person’s career may be permanently damaged.
  • Failing to adequately describe the offensive behavior. Since abusers often have few moral constraints on their behavior, they may have taken great pride in at least partially hiding their offensive acts – purposefully making it harder for witnesses or accusers to step forward.
  • Uncertainty about whether – as witnesses –they should first speak with the harassed victim before or after contacting human resources. Sadly, there are no foolproof steps for safely handling this type of matter. One of the most pragmatic and safest first steps forward is to consult your employer’s handbook on reporting such behavior.

You may also want to contact your Houston employment law attorney for further advice on how to proceed. If the harassing party knows that you witnessed the offensive behavior – your job and future promotions may already be at risk. It’s always wise to quickly find what your best legal options and choices are — based on your specific circumstances;

  • Concerns that retaliation may ruin your career (at least temporarily). This is a very valid concern. After all, abusers will often stop at nothing to hide their behavior since they greatly enjoy it, view it as a privilege – and think any punishment would be unfair. The true stories about how Hollywood producer Harvey Weinstein went about trying to silence his accusers (and possibly, the witnesses to his abuse) are shocking. However, victims and witnesses who report most types of sexual harassment can still win major lawsuits that can compensate them for their suffering and restore their careers.
  • Uncertainty about whether reporting the abuse may take a permanent emotional or psychological toll on them. Numerous studies have indicated that women suffer extensively when they report sexual harassment at work. Since their truthful reports are often not believed, their loss of positive self-esteem can cause serious problems with both depression and even PTSD. Furthermore, if the person reporting the gross behavior has ever previously been sexually harassed or abused, the long-term psychological damage of the newest abuse can take decades to resolve.

You Must Decide Which Steps Forward Best Suit Your Circumstances

Besides speaking to a lawyer, here are some other steps you believe you should consider taking.

  • Carefully study your employee handbook sections addressing sexual harassment. Decide if you feel comfortable doing what’s advised.
  • Keep a journal. Record the dates on which you take any steps to try and address the problem, who you’ve spoken with – or met with – and their responses to you. Note all perceived acts of apparent retaliation, if any. (Be aware that you may later need to turn over a copy of this journal to others if a lawsuit is filed).
  • Make a copy of any written reports or complaints that you decide to file. You must seriously consider asking a lawyer to review anything of this nature first;
  • Confide in one or two long-term, trusted mentors about your situation – people who do not work where you do. This may prove crucial if you need to find a new job while pursuing litigation.
  • Ask your employer for an immediate copy of any reports being placed in your file about your current complaints.

Always keep in mind that if you personally do decide to report the sexual harassment that you’ve witnessed, you’re playing a critical role in trying to resolve a very serious problem.

Our firm is always available to discuss any workplace problems affecting you. These can include sexual harassment, unfair pay issues, denied promotions, various forms of discrimination, wrongful termination — or any other matter that’s unfairly denying you the right to achieve your full potential.

Does the Issuance of a 1099-C Discharge Debtors from Liability?

Does the issuance of a 1099-C discharge debtors from liability? The answer is no, the issuance of a 1099–C does not discharge debtors from liability from the subject debt. The filing of a Form 1099–C is a creditor’s required means of satisfying a reporting obligation to the IRS; it is not a means of accomplishing an actual discharge of debt, nor is it required only where an actual discharge has already occurred.

The fact situation is simple and straightforward. A creditor who has loaned money to a debtor makes an internal decision to “write off” of the debt on its books. At that point in time, the creditor is required by IRS regulations to report the write-off.

While only a handful of courts across the United States have addressed this issue, most have arisen in the context of a bankruptcy. Almost every court that has addressed the issue and the few reported decisions in Texas have concluded that the issuance of a 1099–C does not discharge debtors from liability of the subject debt.

The most thorough analysis of the issue and most cited opinion is In re Zilka, 407 B.R. 684 (Bankr. W.D. Pa. 2009), a bankruptcy decision from Pennsylvania. The Court in In re Zilka found four separate independent legal basis upon which to hold that the issuance of a 1099–C does not discharge debtors from liability. The four legal bases are as follow:

1. The IRS requires the issuance of a 1099-C. 26 U.S.C. § 6050P(a) provides, in pertinent part, that “[a]ny applicable entity which discharges . . . the indebtedness of any person during any calendar year shall make a return . . . setting forth . . . the name, address, and TIN of each person whose indebtedness was discharged . . .  [as well as] the date of the discharge and the amount of the indebtedness discharged.” The information return just referred to is a Form 1099–C.

However, “a discharge of indebtedness” is “deemed to have occurred . . . if and only if there has [been] an identifiable event described in paragraph (b)(2) of this section, whether or not an actual discharge of indebtedness has occurred on or before the date on which the identifiable event has occurred.” 26 C.F.R. § 1.6050P–1(b)(2) sets forth eight identifiable events that can trigger the filing and issuance of a Form 1099–C, among which is “(G) [a] discharge of indebtedness pursuant to a decision by the creditor, or the application of a defined policy of the creditor, to discontinue collection activity and discharge debt.”

2. The IRS does not view a Form 1099–C as an admission by the creditor that it has discharged the debt and can no longer pursue collection. In an IRS Information Letter issued in October 2005 it addressed concerns regarding the impact of a creditor’s compliance with the Form 1099–C reporting obligation and the continuing liability of a debtor on the subject debt. The IRS assured a concerned creditor that filing a Form 1099–C satisfies the reporting requirements of the statute and implementing regulations, neither of which “prohibit collection activity after a creditor reports by filing a Form 1099–C.”

3. That a Form 1099–C does not constitute an admission by the creditor that it has discharged the debt and can no longer pursue collection thereon is consistent with the fact a creditor can issue a corrected Form 1099-C if a recovery of some or all of the monies owed by the debtor subsequently occurs. In another IRS Information Letter issued in October 2005, the IRS responded to a creditor that it “does not view a Form 1099–C as an admission by the creditor that it has discharged the debt and can no longer pursue collection.”

4. The issuance of a Form 1099–C does not constitute one of the means of discharging debt pursuant to the Uniform Commercial Code, § 3.604 governs Negotiable Instruments. Section 3.604 of the Tex. Bus. & Comm. Code, Discharge by Cancellation or Renunciation provides that:

• A person entitled to enforce an instrument, with or without consideration, may discharge the obligation of a party to pay the instrument:

(1) by an intentional voluntary act, such as surrender of the instrument to the party, destruction, mutilation, or cancellation of the instrument, cancellation or striking out of the party’s signature, or the addition of words to the instrument indicating discharge; or

(2) by agreeing not to sue or otherwise renouncing rights against the party by a signed record.

The most recent Texas court to address the issue was Capital One, N.A. v. Massey, No. 4:10 CV–01707, 2011 WL 3299934 (S.D. Texas Aug. 1, 2011) wherein the United States District Court for the Southern District of Texas “adopt[ed] the view that a 1099–C does not discharge debtors from liability” because the form is “issued to comply with IRS reporting requirements” and the IRS does not view it “as a legal admission that a debtor is absolved from liability for a debt.”

Lasting, pursuing collection of a debt that has been written off and reported on a 1099-C does not violate Tex. Fin. Code § 392.304(a)(8) which prohibits the collection a debt that was “discharged and/or extinguished against them.”

All Stock Purchase Agreements Must Include Key Provisions

Every stock transfer is important, regardless of its size. Therefore, your corporation must draw up a comprehensive stock purchase agreement to govern all such transactions. If you fail to do so, shares of stock could easily wind up in the hands of company outsiders whose interests are at odds with those of most shareholders.

Corporations usually choose to prevent this type of problem by including a “right of first refusal” in their written agreements so that their shareholders’ interests remain fully protected. As the term implies, the corporation itself (or one of its current shareholders) will always have the right to try and purchase all shares being sold before an outsider can try to buy them. This is just one of the many basic provisions your Houston corporate law attorney will address when drafting a stock purchase agreement for you.

The following information covers some of the other basic provisions that should normally be included to fully protect your most important corporate interests during sales of stock.

Added Legal Protections Offered by Professional Stock Purchase Agreements 

Even when a buyer and seller know each other well, it’s always best to capture all the terms governing their sales transactions in writing. In addition to describing different warranties, your lawyer may suggest that you also cover some of the topics set forth below in your stock purchase agreement.

  • Details about the parties and the specific stock being sold. For example, you’ll need to state the names of the seller and buyer, the number of shares being sold, and the current dollar value of each share of common stock. The date of the transaction should also be noted, along with a statement that the seller is conveying all ownership of the endorsed stock certificates to the buyer. It’s also customary to note that the seller will pay all applicable taxes on the sale;
  • Proper warranties and representations should be included. It’s important to state (1) that the corporation is legally entitled at the time of the sale to transfer ownership of the stock and that the corporation itself is in good standing with all governing agencies; (2) that the seller is currently the valid owner of the stock and has the right to fully convey all rights in the shares to the seller; (3) that all federal, state and local laws and guidelines intended to govern such transactions are being followed; and (4) that all critical facts have been disclosed regarding the transaction;
  • In some cases, you may want to state that the buyer will pay in two installments. When this happens, a percentage of the purchase price is paid upon both parties signing the stock purchase agreement. On a second date set forth in the agreement, the remainder of the purchase price is paid for the shares (when the contract is fully executed). It’s always preferable to have at least one witness sign the agreement in case either party later tries to challenge the entire transaction in court;
  • Clear definitions should be provided in the opening paragraphs of the agreement. These should always include a description of how the corporation currently pays stock dividends to shareholders. A paragraph should also clearly indicate which dispute resolution or mediation groups may be consulted if any problems arise later concerning the sale of the shares;
  • A specific statement as to whether this sale is governed by the SEC (Securities and Exchange Commission). Depending on the type of corporation you’re running, it may be necessary for your attorney to file paperwork regarding the sale with the SEC.

While the list above isn’t intended to be comprehensive, it should provide you with a clear idea of the many critical topics that most stock purchase agreements should cover. It’s always best to have your lawyer go over your corporation’s specific needs with you before drafting this type of document since federal, state and local laws are constantly changing.

Members of our firm are readily available to provide you with professional legal advice concerning all your corporate needs and interests. We look forward to meeting with you soon.

Some Pros and Cons of Having an Adult Guardian Appointed

While most middle-aged and older adults recognize their need for a Will and a basic estate plan, far fewer understand when it may (or may not) be in their best interest to have a formal guardian appointed to help them manage all their personal and financial (estate) decisions. In general, if you’re still capable of making fully competent decisions regarding your finances, basic living arrangements, and medical care needs, you probably don’t need a guardian appointed for you.

However, if you’re currently suffering from some form of mental incapacity or dementia that impairs your ability to handle such matters, then you may need to have a guardian appointed to help you manage your affairs (either temporarily or permanently).

This article first reviews some of the dangers that can occur when the wrong person becomes your guardian and then lists the various legal documents that can help all adults provide for their general medical, financial, and everyday needs should they unexpectedly become very ill or need extensive medical treatment.

Can Courts Abruptly Take Away Elderly People’s Rights to Live as They Choose?

The New Yorker magazine recently published an article in October 2017 entitled, “How the Elderly Lose Their Rights.” It details the real-life experience of many seniors who suddenly found themselves under the control of a “questionable” court-appointed guardian in Clark County, Nevada. In some cases, these older Americans were in regular contact with family members – when a local court guardian decided that they could no longer live on their own and required her overbearing control of their lives.

In some instances, all it took was a hired home healthcare aide’s statement that the elderly person could no longer properly care for himself or his spouse, even though appropriate outside care had obviously been employed for such purposes. One court guardian (who’s been indicted for her actions), would simply arrive at an elderly person’s apartment or senior care facility and announce that she had just gotten herself appointed as that person’s (or couple’s) legal guardian. That same day, the individuals were then forced to leave where they had been living and go move in where this previously unknown woman directed.

Immediate attempts by family and other outsiders who tried to help proved futile. Instead of the court allowing the elderly to appear in court to respond to concerns about their mental competency, the court allowed a court-appointed, professional guardian to file emergency ex parte petitions indicating that immediate decisions had to be made regarding the seniors’ best interests. One couple’s daughter who tried to help her parents after they suddenly disappeared from their home had to endure various types of character assassination before she finally won their freedom. By that time, all her parent’s finances had been drained – supposedly spent in their best interests.

Sadly, the article also contains the chilling observation that this type of elder abuse has become far too common in many counties across this nation – especially in areas where seniors tend to congregate. Hopefully, more states will follow Nevada’s current plans to soon pass legislation that will expressly give seniors the right to be represented by attorneys during all guardianship competency hearings.

Conclusions

Since no adult ever wants to be suddenly “kidnapped”  or taken somewhere (at any age) by a court-appointed guardian or “professional” — it makes sense for all older adults to have their lawyers provide them with the following critical documents:  an Advance Directive for Medical Care, a Durable Power of Attorney and a Declaration of Guardian in the Event of Later Incapacity or Need of Guardian. By naming someone you know and trust in these documents, it should make it easier for your relatives and friends to help you in a manner that fully comports with your stated preferences should you one day become very ill or incapacitated.

Please contact our law firm if you need to ask any questions about creating an estate plan or having the types of documents referenced in this article prepared for you and other loved ones.

What Really Constitutes Sexual Harassment in the Workplace?

The latter part of 2017 may always be remembered as a watershed time in America’s cultural history regarding sexual harassment. After numerous women stepped forward and complained about the allegedly crude sexual behavior of Hollywood film producer Harvey Weinstein(1) and other men in high-ranking entertainment and news media positions, major corporations responded swiftly.

Men like Charlie Rose, the Today Show’s Matt Lauer – and even Garrison Keillor(2) were suddenly fired or saw valuable work contracts cancelled. Perhaps the earlier charges against Bill Cosby involving at least 50 women had played a role in convincing the public that far too many women may actually be suffering routine sexual harassment. Whatever caused this seismic shift in consciousness, a clear message was sent that all offensive sexual behavior in the workplace – regardless of the victim’s gender — must stop now.

However, since a small number of people still question some of these allegations, that issue should be briefly addressed now – before explaining much more basic information about what legally constitutes sexual harassment.

Are False Reports of Sexual Harassment Common?

Women usually gain nothing when sharing past stories about sexual harassment and abuse – especially when most are not rushing to nearby courthouses to file charges against those who mistreated them. There is no pride in sharing such stories – only a sense of vindication when believed. Furthermore, false reports of sexual harassment are rare. In fact, it’s currently estimated that they only constitute about five to seven percent of all allegations.

What follows now is a brief survey of how the EEOC (Equal Employment Opportunity Commission) and others define sexual harassment, along with specific examples of sexually offensive words and behaviors that should never be tolerated in any work-related environment. After all, everyone is more productive when treated with respect.

How Does the EEOC Define Workplace Sexual Harassment?

This unacceptable activity usually includes offensive words or behavior directed toward job applicants or employees by people in positions of authority (or co-workers). However, in some instances, sexual harassment can also include an employer’s customer or client behaving in a grossly offensive manner toward an employee.

All employers must recognize that sexual harassment is a type of sexual discrimination that is forbidden by Title VII of the Civil Rights Act of 1964. That law covers all workplaces with 15 or more employees – including people working for state and local governments. It also applies to members of labor organizations and those working for employment agencies and the federal government.

Sexual harassment may often be considered so offensive that a reasonable person might describe the workplace atmosphere as being intimidating or hostile. Although most sexual harassment tends to be directed at women – it should be emphasized that women may also be found liable for this type of illegal behavior.

While no list could ever fully indicate every set of words or behaviors that constitute sexual harassment, there’s one posted on the website of the United Nations that provides helpful guidance.

Words and Actions Frequently Considered Sexually Inappropriate in the Workplace

  • Repeatedly asking the same person to go out on a lunch date (or to various social events) with you when no special interpersonal relationship has been consensually established;
  • Touching other workers when there is no excuse to do so – or rubbing up against someone when there’s plenty of room to avoid doing so while handling your job;
  • Making offensive gestures with your fingers, hands or body in a manner that suggests that you would like to have sex with someone;
  • Handing out (or posting) offensive drawings or pictures involving sex that a reasonable person would know might be offensive to some people;
  • Making noises or sounds as though kissing another person or having some type of sex with them;
  • Spreading false sexual rumors about co-workers or others in the workplace in hopes of jeopardizing their job security;
  • Repeatedly telling jokes or stories about sexual “conquests” that others might consider offensive;
  • Looking at others in a manner that indicates that you are “sizing them up” sexually in a suggestive manner.

If you still find it hard to decide what’s acceptable workplace behavior – then always act as though every interaction you have with others at work is being videotaped and recorded. Better yet, simply treat everyone with the same level of respect in the workplace that you normally show to your most important clients or customers.

Please feel free to contact our office if you need help drafting the “sexual harassment” sections of your employee handbook or need advice on evaluating appropriate workplace training programs that address this topic. We can also help you evaluate any formal or informal sexual harassment complaints that employees may have filed with the EEOC or your human resources department.

(1) https://www.barna.com/research/behaviors-americans-count-as-harassment/?utm_source=Barna+Update+List&utm_campaign=59e62a6e6f-EMAIL_CAMPAIGN_2017_11_28&utm_medium=email&utm_term=0_8560a0e52e-59e62a6e6f-171985045&mc_cid=59e62a6e6f&mc_eid=c0385fd205

(2) https://www.barna.com/research/behaviors-americans-count-as-harassment/?utm_source=Barna+Update+List&utm_campaign=59e62a6e6f-EMAIL_CAMPAIGN_2017_11_28&utm_medium=email&utm_term=0_8560a0e52e-59e62a6e6f-171985045&mc_cid=59e62a6e6f&mc_eid=c0385fd205

 

Gray Areas Keep Emerging in the Field of Sexual Harassment

Sexual harassment cases have remained quite numerous during recent years. Lawsuits involving Fox News, the late Roger Ailes and the transportation giant Uber have kept our judicial system very busy. In fact, in early July of 2017, the Los Angeles Times reported that Fox News had just fired the head of its L. A. sports programming division due to new allegations of workplace sexual harassment.

Perhaps it’s not surprising that while so many claims were being filed during the past five years, courts were being asked to evaluate some newer types of allegations. Several of them involve employees who were fired because their bosses said they were too attractive to have around or interact with on a regular basis. Equally odd are recent workplace problems caused by male employees trying to distance themselves from female co-workers who they claim harbor romantic feelings for them.

Before examining these new issues closer, it’s important to review what constitutes modern sexual harassment.

The EEOC’s Definition of Sexual Harassment

On its website, the EEOC states that it’s simply wrong to harass a person (such as a job applicant or employee) based on that person’s sex. Harassment can include someone making unwanted sexual advances or requests for sexual favors from another worker. While both men and women can suffer sexual harassment, statistics reveal that women file 83% of these claims. Some surveyed workers have said that they believe that this is probably true since men are often  overrepresented in positions of power in the American workplace.

Harassment doesn’t always involve any touching. In fact, offensive remarks about the opposite sex can be enough to constitute sexual harassment. What courts are often looking for is whether various workers’ words and actions have created a hostile working environment. When simple teasing and offhand comments become quite regular, they can legally be viewed as sexual harassment. Even consensual office romances can cause legal problems because when they end, one of the two participants may often wind up fired or demoted.

Relatively new sexual harassment claims involving bosses who fire employees for being too attractive provide new dilemmas for our courts. Likewise, employees distancing themselves from others because they think their co-workers harbor hidden romantic feelings for them are also uniquely troubling. These types of “gray area” claims are discussed further below.

Should It Be Lawful to Fire Someone Who Is Too Attractive – Or a Female?

Oddly enough, one or two courts have allowed bosses to simply dismiss women because they’re so attractive that the men fear they can’t control themselves if they remain in the workplace. One such case was filed by Melissa Nelson against her dentist employer in Iowa. This 33-year-old office assistant had worked for this dentist for many years. However, she was let go after he claimed that his wife had learned that her husband was sharing improper text messages with the young woman.

Of course, this type of employer claim clearly implies that the woman will make poor choices and should therefore be dismissed as some type of precaution. Perhaps the employer just wanted to dismiss her but couldn’t come up with a better excuse. Nevertheless, the Iowa Supreme Court later reaffirmed its decision, denying this fired young woman any type of compensation. The court even tried to dodge its questionable “logic” by saying that the firing was based on feelings – and not the young woman’s gender.

Unfortunately, that Iowa case is not unique. A similar case was filed due to the 2013 firing of a Manhattan yoga instructor who worked in a chiropractor’s office. She was told she was “too cute” — and that her ongoing presence in the office would make her boss’ wife jealous. A judge dismissed her case back in 2016. However, that case isn’t over. In August 2017, an appeals court ruled that the Manhattan yoga instructor can proceed with her case and sue the chiropractor.

What About Men (or Women) Who Want to Avoid Working with the Opposite Sex?

Can an employee refuse to spend legitimate work time with a woman because he believes she has a crush on him? Can this be viewed as some type of sexual harassment? This issue came up recently in an Austin, Texas workplace. William Manno, who had been refusing to work alongside a specific female — is now having to reevaluate and change his behavior.

Thomas Kochan, a Massachusetts Institute of Technology professor and co-director of the M.I.T. Sloan Institute for Work and Employment Research says that when workers inappropriately refuse to interact with others due solely to their sex or presumed romantic feelings – employers may need to intervene. In fact, it can prove very useful and instructive for employees who want to isolate themselves from members of the opposite sex to begin participating in group work activities so they can develop healthier work habits.

Regardless of how one views some of these newer issues, it’s important for all workers to stand up for their rights when any serious harassment behaviors develop.

What All Workers Must Do When They Believe They’re Being Sexually Harassed

  • Keep detailed notes about the offensive incidents. Be sure to write down the specific facts, the dates and times involved — and whether there were any witnesses. Keep this log at home and not in your place of employment;
  • Carefully review any employee handbook you’ve been given. Try to follow your company’s recommended way of handling suspected sexual harassment. If reporting the incident to your immediate supervisor won’t work – you may want to confide in a senior employee you believe you can trust. However, you should first review all the steps named here – before taking any action;
  • Immediately contact your local Houston employment law attorney. Once you’ve scheduled an appointment, gather together all relevant employee handbooks, training materials and other pertinent documents regarding your sexual harassment claim. Your lawyer will tell you exactly which steps to take in the proper order to fully preserve your claim in a timely manner;
  • Be prepared to contact the EEOC (Equal Employment Opportunity Commission). You normally have 45 days from the date of the event to obtain help and advice from an EEOC counselor. Your lawyer can inform you how such claims are normally processed and tell you about other legal remedies you may need to pursue;
  • Seriously think about what you may lose if you don’t file an EEOC claim and consider other litigation. As most women know, some of the worst instances of sexual harassment are never reported. After all, no one wants to become the subject of office gossip if the employer fails to honor your privacy. Likewise, concerns about retaliation are common. Fortunately, there are legal remedies for retaliation. However, if you don’t file a claim, it may become much harder for you to protect your career in the future against the negative repercussions of the current sexual harassment.

HB 1974 Provides Useful New Power of Attorney Provisions

The State Bar of Texas often promotes new legislation like HB 1974 that helps people more readily use probate statutes to benefit themselves. This new statute provides changes to durable powers of attorney (POA) that were supported by the Bar’s Real Estate, Probate and Trust Law Section. They became effective on September 1, 2017.

In broad terms, these new provisions (1) clarify certain legal presumptions involving durable powers of attorney, (2) broaden the types of powers that principals can give to designated agents and (3) define when a party can legally refuse to accept someone’s power of attorney.

Penalties for not accepting powers of attorney are also discussed since these documents must usually be accepted as valid (unless clear exceptions set forth in the new provisions are met.)

Legal Presumptions Supporting Texas POAs

  • When properly notarized and signed by the principal who created the document, a durable power of attorney (POA) naming an agent must be considered valid;
  • A POA drafted in another state must be considered valid (once it’s certain that it fully complies with the laws of the other state);
  • The recipient of a faxed, photocopied or emailed copy of a POA can rely upon it like the original without liability.

New Powers and More Agents Can Now More Easily Be Included in POAs

  • If the principal names co-agents, they can act independently of each other – unless the POA specifically forbids such activity;
  • New rights of survivorship can be created or changed by named agents – if this right is specifically set forth in the POA;
  • The designated POA can delegate certain expressly assigned authority to others;
  • An agent can create, terminate or make various changes to an inter vivos trust;
  • Rights of survivorship and certain beneficiary designations can be changed by an agent if the principal included them in the POA document.

Specific restrictions are also set forth regarding the new parties an agent can name when making certain POA changes – they are designed to prevent the agent from naming anyone who the agent already has a legal duty to support.

Limited Facts or Known Events That Can Justify Rejecting a POA

Although this new legislation clearly states that power of attorney documents should normally be accepted and that penalties can apply if this doesn’t occur – the new statutes do list numerous situations that can justify the rejection of a specific POA. Here are some of the many exceptions that can allow someone to reject a proffered POA.

  • The party being given the POA has reason to believe that an SAR (suspicious activity report) has been filed regarding the agent or principal;
  • The person hesitant to accept the POA is aware that a judicial proceeding has already begun that was initiated to determine the document’s validity;
  • A party has a “good faith” belief that the named agent has a criminal record based on financial crimes;
  • The party handed the POA believes in “good faith” that the principal is currently being abused in some manner by the named agent;
  • The party asked to accept the POA has received conflicting instructions from one or more agents named in that same document.

While this list isn’t intended to be comprehensive, it does set forth some of the new provisions justifying a person’s decision to reject a POA document. However, anyone who won’t accept a proffered POA must state this refusal in writing and give the specific reasons for rejecting it.

Since questions may always be raised regarding many powers of attorney, it’s wise to first speak with your Houston probate attorney when trying to decide whether to honor one that’s been tendered to you. Our firm is also prepared to draft any new POA that you may currently need.

Shareholder Agreements Require Flexible Buy-Sell Provisions

There are many reasons why shareholders in closely-held corporations may need to quickly sell their shares to others. Therefore, its important when drafting a shareholder’s agreement to cover every basic aspect of buying and selling shares – in addition to the general administrative matters that must normally be addressed.

Depending on a corporation’s number of major shareholders and business pursuits, a flexible framework helps facilitate every goal. The following list sets forth some of the main terms that shareholder agreements should cover, separate and apart from the buy-sell provisions that will be discussed in greater detail below.

Common Administrative Topics Set Forth in Many Shareholder Agreements

  • Voting rights. Always describe each shareholder’s voting rights and when they can be properly exercised;
  • Qualifications for serving as corporate officers. Basic requirements must be stated so that only fully qualified individuals can serve as corporate officers at any level;
  • Noncompete provisions. All parties involved with a corporation must agree to avoid compromising its trade secrets or later leaving and then trying to compete for its clients for a limited time;
  • Preferred groups to consult with when internal disputes must be resolved. Include the names of specific mediation or dispute resolution services that can be contacted and how the corporation should decide when such outside help is required;
  • Inclusion of anti-dilution provisions to protect stock values;
  • A description of major shareholders’ “tag-along” rights;
  • Registration rights must be explained and how they apply to certain restricted stocks;
  • Stock valuation procedures must be described and closely followed.

Once these and other crucial topics have been covered, your and your Houston corporate law attorney should discuss the best buy-sell provisions suited to your corporate structure.

Basic Buy-Sell Provisions – Events That Often Trigger Their Use

Your shareholder’s agreement should always include a very detailed explanation of how shares should be sold when one of the following events takes place.

  • The death of a shareholder;
  • The termination of an employee shareholder – whether “for cause” or without cause;
  • The disability of a shareholder;
  • A shareholder’s retirement

When trying to draft the best buy-sell procedures to address these situations, it’s often wise to sit down and review your corporation’s main concerns and interests with your lawyer.

Should the Selling of Shares Be Mandatory — or Provide Parties with Greater Choice?

When trying to answer this question, you may want to provide different answers, depending on whether the sales are to the corporation itself, other shareholders – or to third parties.

  • Should your corporation be given the first right to purchase (or redeem) the stocks? If you and the controlling officers of your corporation wish to include this provision in your shareholder agreement, be sure to first consider the possible capital gains tax issues involved;
  • Do you want to automatically offer the available shares to other general shareholders if the corporation isn’t interested in redeeming the shares after a set deadline? If so, it’s important to indicate if majority shareholders will have the first opportunity to buy the shares;
  • Are you willing to allow outside third parties to buy the newly available shares? If so, you must decide in advance the types of criteria that such buyers must meet.

Other Key Issues Involved with Drafting Your Buy-Sell Provisions

  • Setting the proper price to be paid for the stocks. In general, if the available shares are to be purchased by the corporation or one of its current shareholders, you should have already created a clear formula in your shareholder’s agreement for determining the current, proper valuation of the stock. However, if the shares are to be sold to an outside third party, that outsider’s offer will normally be determined by the current market price for the type of shares involved;
  • How should the price be paid? Most corporations will benefit from establishing a basic buyout procedure within its shareholder agreement so that these common transactions can be handled according in a very clear, pre-determined manner. Since lump-sum payments are usually not preferred, you will need to decide if you prefer such options as:
  • A buyer-financed buyout
  • A seller-financed buyout, or
  • Some type of financing arrangement involving insurance or a trust

Since a corporation’s success is often determined by the terms and quality of its shareholder’s agreement, please feel free to contact our firm so we can provide you with our general legal advice or help you draft a new agreement. 

Hurricane Harvey: Avoiding Fraudulent Repair Contractors

Fortunately, many first responders and volunteers nobly rushed out to help residents of Houston and surrounding areas after this catastrophic hurricane unleashed torrential rainfall and flooding. However, too many people lost their lives during the lengthy onslaught and far more suffered extensive property damage. As survivors try to reclaim their lives, they must exercise great caution when hiring repair contractors so they can properly repair and rebuild their homes.

Based on Texas Attorney General website information, and on our country’s recent storm history, we now know that many dishonest “scam artists” tend to show up (often from out of town) right after natural disasters like Hurricane Harvey. They eagerly try to convince desperate homeowners that they alone know how to repair their homes quickly and for far less money than their competitors.

Our general advice to you is to do your homework and carefully check out each contractor’s business reputation before signing on any dotted line. As we stated in our Labor Day email, we will review any contracts from contractors who want to perform work on your property.  We will do this free of charge limited to contracts that are presented to you by the contractor. Please call us for assistance.

Basic Considerations When Planning to Repair Your Home

To help you obtain the quality repairs you need, we’ve summarized some key steps below that can help you hire a competent repair contractor. Specific warnings have also been added so you can spot some of the many “red flags” indicating that someone either isn’t properly skilled or licensed as required under Texas law. Hopefully, you can avoid being swept up in what “60 Minutes” has called “The Storm after the Storm” when disreputable contractors sweep in to make a fast buck while you’re still grieving various losses.

Key Steps to Take While Getting Your Home Repaired

1. Only hire a contractor who has a fixed, local business address (or one nearby) and who offers fair terms of service. You need to hire someone who has lengthy experience doing the type of work you require and who can provide you with local references. This person must be willing to accept partial payments as the job progresses, while regularly paying all subcontractors for their labor and materials as the project moves forward;

2. Search for a contractor who has worked for someone you know and quotes reasonable fees. Whenever possible, only hire someone who has worked for a family member, close friend or business associate. If you cannot find someone that way, then at least call the Houston Better Business Bureau to check on the company’s reputation. Don’t let anyone pressure you into quickly signing a contract so you won’t lose a special price break.

3. Take the time to solicit several bids before choosing the best one (which may not be the lowest). Those who bid too low are often hoping to trap you into later adding other fees that aren’t properly covered in your repair contract.

4. Check online websites to see if you can learn more about each contractor. When you contact the Houston Better Business Bureau, ask if there are any recent negative or unresolved complaints on file. Remember, no listing at all is not necessarily a positive sign. You might also consider visiting such websites as HomeAdvisor.com and the Angie’s List website. The latter one now allows everyone access to most general information for free. Also check the name of the owner(s) of the company. Many times, unscrupulous contractors form new companies to hide their real reputation. Check with the Secretary of State in the state in which the company is incorporated and get the names of individuals shown as officers and directors;

5. Get every contract term in writing – never agree to a mere oral contract for this type of work. Also, avoid signing a contract that’s missing key terms, due dates, or estimated amounts for materials. You can be sure that if you let any lines remain blank, they’ll often be filled in later with terms that greatly benefit the contractor at your expense. Also, keep in mind that if the main contractor fails to pay all subcontractors, they can place liens on your home until you pay them. If the contractor disappears, most courts will hold you liable for the unpaid wages and materials;

6. Find out if the contractor is fully licensed to do the type of work you want, based on Texas law. If you’re unfamiliar with the laws in this area, call your Houston business law attorney here at Murray Lobb for timely advice. Also, make sure the contractor will be securing all required permits before the two of you sign a contract and let the work begin. Keep in mind that it can be a a negative “red flag” if the company says it’s your responsibility to obtain the permits;

7. Inquire about the type of insurance the contractor carries. The company should normally be carrying worker’s compensation, personal liability, and property damage coverage. Don’t just take the company’s word – ask to see proof (insurance certificates) clearly indicating that all such policies are currently in force;

8. Request the inclusion in your contract of a “sign-off checklist” tied to all payments. This will help you hold on to your property and hopefully avoid the placement of any liens upon it because your general contractor left the area, without paying all subcontractors.

9. Obtain your own financing if you can’t pay with a check or credit card. Never sign up for financing through a lender suggested by the contractor. It’s never wise to go through a lender who is a close associate of your contractor since critical terms may be hidden from you. If you can’t pay “cash” – and many people cannot – carefully review the interest rates and fees various banks or credit unions are offering before hiring a contractor

10. Move forward cautiously if you still have a mortgage on your home. Be sure to contact the bank holding the mortgage and obtain its written approval of the contractor you are hiring. (It’s always possible that the bank may already have a short list of reputable contractors that you can choose from when making repairs).

The attorneys here at Murray | Lobb, PLLC would like to help you sort through this daunting task by offering to review any contracts from contractors who want to perform work on your house. 

Please remember that our firm is here to help you as you try to rebuild your home and your life. (If you’re in need of immediate financial or other emergency assistance due to the hurricane, please visit this federal government website.) We look forward to helping you when you call.