BizLawBuz …. The Power of Know

Who among us, from time to time, doesn’t have at least one or two vials in our medicine cabinets, closets and drawers with expired, unwanted or unused prescription medication? In years past, the standard procedure for dealing with these has been to flush them or throw them in the trash. Problem is, trace amounts of these medications are now showing up in our water supplies and studies are ongoing in an effort to determine what effect these trace amounts may be having on all of us. Further, according to a 2009 study, more than seven million Americans abuse prescription medications, including teens looking for a way to get high. The source of many of these drugs is the family medicine cabinet.

Providing for safe disposal of prescription drugs
In response to both the environmental and human aspects of the problem, the Safe and Secure Drug Disposal Act of 2010 was signed into law on October 12, 2010. This Act amended the federal, Controlled Substances Act and allows the Drug Enforcement Administration (DEA; an agency of the U.S. Department of Justice) to develop a process that provides for the safe disposal of prescription drugs. A key ingredient of that process are drug take back days. These events, overseen by the DEA in conjunction with local law enforcement agencies, are scheduled every six (6) months around the country. The first two such events took place in 2010 and involved more than 4,000 state and local law enforcement agencies. These two events resulted in 309 tons of pills being collected.

Finding drug collection sites near you
The next National Prescription Drug Take Back Day is scheduled for October 29, 2011. For more information contact you local law enforcement agency and visit the DEA Drug Take Back website. The website contains a useful link for finding collection sites near you.

Duane L. Reynolds

A deadline is looming. Assuming you filed your 2010 income tax returns on time, you have until October 17, 2011, to recharacterize contributions to Roth IRAs as contributions to traditional IRAs. This deadline may be important to you if converted your traditional IRA to a Roth last year betting that the market would perform well and that you would, as a result, enjoy significant tax-free earnings in your retirement years, but are now having second thoughts.

Brief window to convert to Roth IRA
The October 17 deadline also applies to the recharacterization of contributions to traditional IRAs as contributions to Roth IRAs. If you are one of the fortunate few whose investments have done well and you are feeling confident about future market performance, you may want to take advantage of this brief window to convert your traditional IRA to a Roth.

Refund of taxes
If you do elect to switch from one type of IRA to the other, the IRS will treat both the recharacterized contributions and the income attributable to those contributions as though they were in other type of IRA all along. For example, if you previously paid income taxes upon converting to a Roth IRA, you would get a refund of those taxes upon reconversion to a traditional IRA.

Contributions that do not qualify
Most, but not all, types of contributions can be recharacterized. Regular contributions to both Roth IRAs and traditional IRAs qualify, as do Roth conversion contributions. An example of a contribution that does not qualify is a tax-free rollover from one traditional IRA to another.

If you think you want to recharacterize your Roth IRA as a traditional IRA or vice versa, be sure to talk with your tax or financial advisor right away as the process can take some time to complete.

Lee Flaherty

Regularly, I have business clients tell me with confidence, “I don’t need to worry about hiring this new employee even though she has a non-compete with her former employer. Those agreements aren’t enforceable anyway.” Just as often, employers complain, “He can’t go to work for my competition! He has a non-compete agreement with me.” Who is right? At the risk of sounding like a lawyer, I have to say, “It depends.”

Covenants not to compete (non-compete agreements) are contractual arrangements in which one party (typically either an employee or a business seller) agrees that he will not engage in certain competitive activity to the detriment of the other party for some specified period of time. In some jurisdictions, like California, state law prohibits this type of agreement in the employment context. Other jurisdictions, including Michigan, expressly permit non-compete agreements by statute. However, even where they are permitted, these agreements are typically subject to certain “reasonableness” standards. The Michigan statute, for example, provides: “To the extent any such agreement or covenant is found to be unreasonable in any respect, a court may limit the agreement to render it reasonable in light of the circumstances in which it was made and specifically enforce the agreement as limited.”

In practice, this means that any given covenant not to compete is presumed to be enforceable but it is also subject to attack under a claim that it is not “reasonable.”

Because non-competes are legally permissible, employers should take advantage of the opportunity to protect their business interests by seeking reasonable non-compete commitments with their employees. To minimize the risk of a challenge, employers need to exercise restraint and craft restrictions – especially as to duration and geographic scope – as narrowly as possible. Additionally, employers should be leery of hiring an employee from a competitor if that employee previously signed a non-compete agreement with the competitor.

On the flip side, when an employer believes a former employee is violating her non-compete agreement, it must evaluate the cost of enforcement against the actual harm it expects to suffer. To gain any meaningful benefit, employers typically will need to file a lawsuit quickly and ask the court for some sort of preliminary injunctive relief. This means legal costs will be compressed and accelerated as attorneys ramp up for what is effectively a trial within a trial at the hearing for the preliminary injunction.

My advice? Take a cautious approach. If you are considering hiring a new employee who already has a non-compete agreement with her former employer, do not assume that the agreement won’t be enforced or that the former employer will not drag you into court to fight over it. If you are the former employer, and you wish to take action to enforce the agreement, you need to do a cost benefit analysis to ensure that the benefits of enforcement justify the cost of getting there. If you do not have non-compete agreements in place with your sales and management staff, you should. And if you do, conduct a full review to make sure they have in fact been signed and that they have been tailored narrowly to satisfy reasonableness requirements under the law.

Dirk A. Beamer