Chicago Business Lawyer Blog

Groupon is facing the possibility of a class-action employment lawsuit in Chicago amid allegations of unpaid overtime by sales reps, according to Crain's Chicago Business.

Chicago business attorneys can often help growing companies avoid the common pitfalls of employment law. Whether wage and hour disputes, sexual harassment or discrimination issues, consulting an experienced law firm can ensure a company's growing human resources department is on solid legal footing. In some cases that could involve drafting employment agreements or determining executive compensation, in other cases it could be as simple as ensuring the employee handbook properly and legally addresses issues like the Family and Medical Leave Act.

In this case, a former Chicago sales rep filed a lawsuit against Groupon in U.S. District Court. She left the company's employment last month. She is seeking retroactive overtime plus 2 percent in damages. The suit claims the 3-year-old company didn't pay enough, failed to pay overtime, and violated other wage laws.

The suit seeks class-action status on behalf of all employees who may not have received proper overtime pay. It's the latest legal setback for the Chicago-based company, which sells daily deals via Internet coupons. The company's initial public offering is on hold and it's facing multiple lawsuits over whether it's e-mailed coupons violate the consumer protection laws that regulate gift cards. The company has a workforce of nearly 10,000 -- including about 4,800 sales reps.

About 1,000 U.S. reps are paid $32,500 a year plus commissions. The lawsuit accuses the company of failing to pay overtime until last spring when management discovered the problem. The company reportedly promised to calculate and pay overtime owed, but that never happened. By some estimates, reps are owed as much as $5,000 each, which could amount to a $2 million payout by the company.

These are not issues unique to Groupon. Too often, startup companies minimize the need for sound legal advice for far too long. They see it as an expensive line-item and not an investment. As the legal woes at Groupon illustrate, sound legal advice now can save a company from dealing with expensive legal headaches in the future.

For its part, Groupon has brought in new management to address the growing pains. While the company's massive sales force is hurting its bottom line (the company has yet to turn a profit), it is also seen as a barrier to entry for other companies.

The Wall Street Journal reports that Groupon is downplaying the suit's significance, saying similar suits have been filed against Cisco, Salesforce, Nortel and others.

The Journal reports the fast-growing company has reported revenue of $1.5 billion this year, compared to $131.5 million during the same period last year.

Continue reading "Chicago Tech Startups: Employment Issues are Avoidable with Sound Legal Advice" »

We were excited to learn about recent news for our client Bodacious Enterprises, Inc., which we assisted in starting up earlier this year. They are making progress and moving forward very rapidly.

Bodacious was formed when one of the principals purchased and was greatly impressed by an item of Goodnighties wicking and recovery sleepwear. After that positive experience, we helped Bodacious negotiate an exclusive sales represenative agreement with the manufacturer in order to manage marketing and sale activities.

Starting this week, Bodacious and Goodnighties have launched their first television infomercial and advertising campaign on the Hallmark, ion Life, AMC and other women-oriented cable channels. In conjunction with this, there is a special offer available to purchasers at www.buygoodnighties.com.

In another development, Bodacious and Goodnighties also are featured in the December 2010 edition of Chicago Northshore's Make it Better magazine and website. There's a special offer there for readers.

Congratulations and Good Luck to our client Bodacious!

North Shore business lawyer Jeremy A. Gibson is experienced in all aspects of start-up, distribution, sales representative, marketing and advertising legal issues. He would be happy to discuss your Chicago corporate law questions and concerns at offices in the Loop, Deerfield, Oak Brook, O'Hare and Schaumburg areas.

As a former journalist, one of my most persistent and consistent rituals is as leisurely reading of the Sunday newspaper (print version preferably) as circumstances permit. Over the years, I enjoy the Corner Office feature of the New York Times business section, where CEOs and similar types discuss their career and leadership experiences.

This past Sunday's column featured a particularly succint summary of how to run an organization effectively from Shivan S. Subramaniam, chairman and CEO of FM Global, an insurance company. His message resonates with my own experiences as a member of three different firms and a litigator handling commercial lawsuits. The bottom line is honing the message and priorities, communicating them and then trusting people to implement them, even if they do so in their own style.

Asked about early leadership lessons, Mr. Subramaniam noted:

One is that people don't necessarily do things the way you would do them. And if they don't follow precisely the way you think about something, that doesn't necessarily mean that they're wrong. That took some maturity to understand -- also, that not everybody will behave the way you behave.

But the bigger picture is to make very sure that everybody in the company has the same goal in mind. That was always the more important thing I learned over time. It matters less what people do or how they do it, but do we all agree on the same goals?

Over the years, that has led to us having very simple goals at our company. We call them "key result areas" or K.R.A.'s. We're multinational -- we've got 5,100 people, 1,800 of whom are engineers. We're very analytical. But we have three K.R.A.'s, nothing terribly fancy. And everybody focuses on them. One is on profitability. One is on retention of existing clients. And one is on attracting new clients. That's it.

You can talk to people in San Francisco, Sydney or Singapore, and they'll know what the three K.R.A.'s are. All of our incentive plans are designed around our K.R.A.'s, and every one of those K.R.A.'s is very transparent. Our employees know how we're doing. And, most importantly, they understand them, whether they're the most senior manager or a file clerk, so they know that, "If I do this, it helps this K.R.A. in this manner."

As a related point, Mr. Subramaniam commented on learning something from one of his imporant role models:

He's the one who really started to teach me about the importance of simplicity. Things like, "If you can't explain it to me in a couple of sentences -- what the idea or what the concept behind it is -- it's obviously something you don't know how to do. If you've got to write a whole page to describe something, that doesn't make a lot of sense."

In concluding, Mr. Subramaniam distilled and explained his management philosophy:

My philosophy of leadership is that four or five of us can come up with a much better decision than just I can alone. And if you follow that philosophy, you'll probably have a very good, talented management group around you. People can always perform a whole lot better than how you think they're going to perform. You need to really give them the opportunity to do that.

Ultimately, Mr. Subramaniam's remarks, which emphasize the importance of what's important and not being a micromanager, reminded me, oddly enough, of a similar dynamic in learning how to deal with commercial litigation.

One of my very first tasks as a new Chicago business lawyer was to advise a client with a small business on a busy street about his rights when a contractor installed a new driveway with some imperfections and variances from the specifications of construction contract. I found out that a court was unlikely to take action if there had been "substantial performance" of the agreement and something along the lines that "the law does not trifle with trivialities." So, I learned how to tell a client something that he or she did not want to hear, but was in his or her own best interest: "relax."

Ever since then, that has informed my approach to evaluating performance, whether in terms of an employee or other party to in a contract or business law dispute. Usually, if the important things have been covered, even if not quite perfectly or exactly how you would do it, then that's pretty good.

Jeremy A. Gibson is an experienced Chicago corporate lawyer, who handles the preparation, negotiation, interpretation and implementation of contracts and agreements for small and large businesses. In addition to the Loop, he is available to meet about business law matters in Deerfield, Oak Brook, Rosemont, Schaumburg and elsewhere.

This week I attended the annual dinner of the Chicago chapter of the Association of Corporate Counsel, which is an international organization of in-house attorneys. The Chicago unit is one of the largest units and I would estimate there were approximately 1,000 people in attendance at the Hyatt on Wacker Drive. As a former in-house attorney, I have attended a number of these and they usually have excellent featured speakers.

This year's was no exception. The main speaker was journalist and writer Malcolm Gladwell. I had enjoyed several of his books, Blink, The Tipping Point and Outliers, which are both very readable and thought provoking. I was interested to hear what he had to say these days.

The gist of his remarks really was to never take anything for granted or be too impressed by credentials. The starting point was the Wall Street meltdown, such as the blazing flameouts by such titans as Bear Stearns, Lehman Brothers and AIG. How could such disasters happen at firms populated by "masters of the universe" and Ivy League M.B.A.'s? Presumably these best of the best had access to the best information and the best advice. The answer essentially is that age old threat, hubris, and being too insulated and not challenged enough.

Gladwell underscored his theme with some comparable events from the Great Depression. But, he spent most of his time, and illustrated his research and story telling skills, by focusing on Union General Joseph Hooker and the Battle of Chancelorsville from the Civil War. Gladwell reviewed the overwhelming force at Hooker's disposal and exhaustive intelligence he gathered on the position and plans of his adversary, Confederate General Robert E. Lee. Hooker believed he had outflanked Lee in every way and done everything to prepare for an overwhelming victory to start the next morning.

Yet, though highly outnumbered, Lee launched an attack the preceding night, somehow catching the Union army completely offguard and in disarray, leading to a chaotic retreat. What had seemed a sure victory, became an inexplicable and embarrassing defeat.

So, to me, the takeaways were to always be careful to prevent overconfidence and never put to much faith in the purported experts. In other words, as we like to say around here, whether for business or law, never be afraid to challenge the conventional wisdom, when the facts or common sense guide you to do so.

Contact Chicago and Deerfield business lawyer, Jeremy A. Gibson, to discuss your favorite books or resources with good teachings or guidance for business law.

There was an interesting piece in this past weekend's New York Times Magazine describing how brazen, entrenched and sophisticated the infrastructure is for making copies of brand name merchandise.

The article, entitled "Inside the Knockofff-Tennis-Shoe Factory," provides a look at how counterfeit products of famous brands are ordered from and made at the manufacturing centers in the Putian area of China. Among other things, authorities indicate that this business is attractive to criminal enterprises because the sanctions if caught are much less than those for trafficking in illegal drugs.

The story also details the ups and downs of U.S. federal enforcement efforts:

In 1998, the National Security Council studied the impact of intellectual-­property crimes and concluded that federal law-enforcement efforts lacked coordination. An executive order soon followed, sketching out the role of the National Intellectual Property Rights Coordination Center. Two years later a makeshift office opened in Washington, but after 9/11, chasing counterfeit goods lost priority. Ballman said: "Resources and focus changed overnight. Agents were detailed elsewhere and moved away from thinking about I.P. to counterterrorism and weapons of mass destruction."

The Obama administration has made intellectual property more of a focus. "Our single greatest asset is the innovation and the ingenuity and creativity of the American people," President Obama said in a speech in March. "But it's only a competitive advantage if our companies know that someone else can't just steal that idea and duplicate it with cheaper inputs and labor." To implement his intellectual-property strategy, Obama appointed an intellectual-property-enforcement coordinator, while Immigration and Customs Enforcement invigorated the property-rights coordination center.

Can such efforts make a difference? "You're not going to arrest your way out of this," Bob Barchiesi, president of the International Anticounterfeiting Coalition, told me in a despairing tone this past spring. As long as there is a demand, he insisted, there will be supply. He had just returned from a trip to China, the point of origin for nearly 80 percent of all goods seized by Customs and Border Protection in the previous fiscal year. One day, Barchiesi observed a factory raid where counterfeit jeans were seized by the Chinese authorities. The factory, its employees and all its equipment remained in place. Barchiesi called the raid a "propaganda show."

So, it will remain to be seen if it is feasible to suppress the knockoff artists. However, there are a variety of business and legal reasons that make it important for owners of patents, trade secrets, trademarks and designs to police their rights and protect their intellectual property. These range from creating a credible deterrance threat to avoiding waiving ones' IP rights.

Contact Jeremy A. Gibson & Associates, PC if you believe your proprietary interests are being infringed. Our Chicago intellectual property lawyers can help assess your rights and develop and implement a prudent protection strategy. We are available to provide business law advice and representation in Chicago, Deerfield and throughout the region.

I began my career as a business litigator and have continued to be involved in filing or defending lawsuits ever since. One of the things that I learned from litigation is that you have to be very thorough in gathering facts, reviewing applicable precedents and thinking it all through. Invariably, my view changed after this process, no matter what everyone else around me was saying. That's why part of our motto about tailor our services is: "We do this by listening intently, thinking creatively and, where needed, challenging conventional wisdom."

This brings me to the reaction to LeBron Jame's televised announcement last night that after hearing out five or six teams he's going to join the Miami Heat, assuming that all the contract details get ironed out. I'm not a huge NBA fan, I'm much an NCAAF, NFL and NCAAB follower. And, I didn't plan to watch his special on ESPN. However, I was free and having some pizza with my daughters, so I turned it on as the Chicago Bulls still were a longshot. It was interesting to explain the situation to my uninformed daughers, because they quickly grasped the human factor of deciding to stay in one's hometown, seek out the highest caliber situation or simply join one's friends.

But, what was even more interesting to me was the universal press and blogosphere reaction trashing LeBrown's show. From a business, and contract negotiation, perspective, I completely disagree. First, while there's no doubt that LeBron has a healthy ego like most superstars, I was struck by overall how mature, thoughtful and articulate he was, particularly given that he never attended college. And, it's odd that the very people who complain about the artificial buzz, hype and the like are the ones who choose to write it about. Next, the free agency and negotiation process carefully orchestrated by James, Dwyane Wade, Chris Bosh and others seems sophisticated and far-sighted. It completely turned the tables so that now the draftees had the power of the drafters. Finally, the NBA itself has turned its annual draft into a long build-up and televised extravaganza and nobody seems to complain about that. Ultimately, this neutral observer has empathy for Cleveland fans and residents, but finds LeBron's performance superior to that of those who cover him.

So, thank you LeBron for a reminder that it's important to think for oneself and it's not always easy to be in the minority. You have provided a valuable lesson that careful review, planning and analysis can result in a better outcome, whether negotiation a contract or resolving litigation.

Chicago business attorney Jeremy A. Gibson would be happy to discuss your favorite sports and business or law analogies, along with your corporate, contract or other question, at our Chicago business law office, Deerfield business law office or other suburban office.

We take a diverson today from the subject of business law with a Chicago perspective. Instead, we'll take a moment to consider the upcoming vacancy on the Supreme Court of the United States due to the announced retirement of Justice John Paul Stevens. But, still with a Chicago angle.

I happened to read an unusually compelling article regarding possible candidates. This was a very thorough, well-researched and well-reasoned piece recommending Judge Diane Wood, who sits upon the U.S. Court of Appeals for the Seventh Circuit, which is based in Chicago. The article was by Glenn Greenwald and posted at Salon.com. The article makes a solid case that Judge Wood has the principles, strength of character and collegiality to be the leading choice for the nomination. For example, she has long been able to get along with the prominent conservative jurists on the Seventh Circuit, Judges Richard Posner and Frank Easterbrook.

I've seen Greenwald's name before, but wasn't familiar with him or his work. It was refreshing to see a good piece of journalism in this age of Tweets and sound bites and I recommend it for anyone interested in this subject, particularly if you like the idea of appointing someone from outside the East Coast.