Many companies discover they are large enough to need consistent legal advice, but may not yet require a full-time general counsel. NOVA Business Law Group’s affiliate entity, GarbiaPlocki, LLP, provides Outside General Counsel services to clients seeking long-term strategic planning and counsel designed to help companies grow and compete in a rigorous market. We structure our program around your needs, and can be on-site with your company weekly, monthly, or quarterly to develop a lasting, well-founded relationship with your company and to help guide you just as a full-time general counsel would – but at a fraction of the cost.

All successful companies are well structured. Long-term stability requires organization, efficiency, and preparation. The policies and procedures that make large companies powerful are every bit as necessary to the growing company because they reflect time-tested business principals. We will bring those policies and procedures to your company.

Our Outside General Counsel services include:

Drafting and reviewing corporate policies, such as document retention, non-disclosure, non-compete, or drug and alcohol testing policies;

• Drafting employee manuals and employment agreements;
• Drafting corporate governance documents, such as by-laws, operating agreements, and resolutions, and helping companies maintain
• proper corporate records;
• Drafting, reviewing and negotiating commercial contracts;
• Drafting or revising form agreements;
• Providing assistance with legal and regulatory requirements affecting the company;
• Providing legal advice to company executives and management regarding proposed company actions and long term strategy
• planning; and
• Managing pre-litigation dispute activities.

We focus on steering companies to avoid litigation, but recognize litigation is sometimes necessary. We will help you identify issues before they become expensive problems. Avoiding a single lawsuit, for example, can produce huge savings. And if litigation should arise, NOVA BLG’s team of experienced team of seasoned litigations is standing by to help.

Whether your plans involve long-term growth or a planned exit strategy, your company needs organization, efficiency, and preparation. We believe legal counsel is essential to growing companies, but that they should not be forced to incur the hefty fees charged by big firms, or take on another full-time salary until their company growth warrants that need. We are here to fill that middle ground and help you achieve your short- and long-term goals.

Putting a corporate drug and alcohol testing policy in place takes a few careful steps to permit regular enforcement. Like any policy, the company’s drug and alcohol policy should be given in writing to all employees. The employees should sign a written acknowledgment that they have received and understood the policy, and a consent form.

The company may wish to make execution of the consent form a condition of being hired and/or continued employment. The company should also hold a mandatory staff meeting to introduce and explain the policy and answer any employee questions. The company should consider training its managers and senior officers to observe and manage suspected drug or alcohol abuse.

Actual testing should be performed by an accredited testing agency. Outsourcing this function to a qualified entity will help ensure consistent, accurate testing, and will help insulate the company from claims of improper or unfair testing methods. The current U.S. Department of Health and Human Services certified testing lab in Virginia is Kroll Laboratory Specialists, Inc. in Richmond, Virginia ((804)-378-9130).

We recommend that the company also offer information to employees regarding possible drug and alcohol treatment sources. The U.S. Department of Health and Human Services publishes a treatment facility locator that provides contact information for substance abuse treatment programs by state and city at http://findtreatment.samhsa.gov. There are several hundred drug and alcohol treatment centers located in Northern Virginia and the Greater Washington DC area.

Finally, a company may wish to consider adding an Employee Assistance Program (“EAP”) along with its new drug and alcohol testing policy. Such programs generally assist employees and family members with substance abuse, mental health and other problems that affect their job performance.

Once your drug and alcohol test policy is drafted and implemented, it must be consistently enforced. Companies that fail to enforce their own policy in certain cases may be later precluded from trying to do so. In addition, disparate treatment could lead to wrongful termination and related litigation. The company should appoint a single officer responsible for managing the policy. A well-written policy will guide that officer in his or her enforcement duties, providing a step-by-step procedure in the event of a violation. The company should maintain accurate records of all testing under the policy in confidential form.

Employers who use criminal background checks as part of their hiring practice are likely required to comply with the Federal Fair Credit Reporting Act (“FCRA”) because those employers obtain “consumer reports” from a “consumer reporting agency” (as those terms are defined under the FCRA).  See 15 U.S.C. §§1681 et. seq.   Many employers purchase criminal background checks from national providers, or otherwise subscribe to a database service where they can retrieve similar information.  Those employers in turn make hiring decisions based on those reports.  Those same employers should be prepared to comply with the FCRA.

The FCRA defines a “consumer report” as any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for . . . (B) employment purposes.” 15 U.S.C. §1681a(d) (emphasis added).

The key here is link between the phrases “any information” and “for…employment purposes.”  Arrest and conviction information almost certainly constitutes information “bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.”   Thus, criminal background checks are almost certainly consumer reports.  

However, a “consumer report” must also come from a “consumer reporting agency”, which the FCRA defines as “any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports.”  15 U.S.C. §1681a(e).  Most criminal background check providers satisfy this requirement.  

Accordingly, employers who use criminal background checks as part of the hiring process are well advised to comply with the FCRA.  Part Two of this article will discuss how employers may do so.

Recent rulings by the Supreme Court of Virginia may impact real estate agents’ potential liability.

First, the Supreme Court recently ruled that the Virginia Consumer Protection Act (“VCPA”) created a private cause of action distinct from common law fraud, and thus plaintiffs seeking treble damages against an agent under the VCPA need only meet the “preponderance of the evidence” standard to succeed on their claim.

What does that mean?  In a typical fraud case, a plaintiff must prove each element of the claim by “clear and convincing evidence” – a high standard of proof in civil cases.  A “preponderance of the evidence” is a much lower bar, and the standard typically applied in civil cases.  It is generally understood to mean that “51%” of the evidence must support your claim.  For context, compare that to the “beyond a reasonable doubt” standard applied in criminal cases.    

Because of the high stakes in fraud cases, Virginia courts require a higher standard of proof.  Not so under the VCPA. 

In the case at hand, a homebuyer discovered that the home she purchased had flooded three times under the previous owner.  That owner elected to make basic repairs, but did not waterproof the basement.  The owner then denied any leaks or flooding, and the real estate agent helped conceal the damage.  At trial, the court held plaintiff to the “clear and convincing” standard normally applied to fraud claims, and the jury ruled for the defendant agent on the VCPA claim.

In a unanimous decision, the Supreme Court reversed the defense verdict, ruling that the court applied the wrong standard of proof.  Under the VCPA, plaintiff need only meet the lower “preponderance” standard.

In the second case, a Norfolk Circuit Court judge recently ruled that homebuyers may make a claim directly against a real estate agent for an alleged violation of the Virginia Real Estate Brokers Act, Virginia Code Ann. §§ 54.2100 et seq. (“VREBA”).   Virginia courts have been split as to whether VREBA provides a private cause of action for breach of a statutory duty to disclose adverse facts to potential homebuyers.  In this most recent case, Judge Mary Jane Hall ruled that a plaintiff making that claim may take it to trial. 

In this case, a homebuyer purchased a Norfolk home after being told by her agent that the home had no flood-related issues.  Three years later, during some renovations, the homebuyer claimed she discovered that wooden support beams in the basement had rotted due to flooding and termites, and the foundation had several large cracks caused by flooding.  A year later she sued her agent, seller’s agent, and the brokerage for which each worked seeking the cost of repairs and punitive damages.  The plaintiff claimed that the defendants failed to disclose the adverse facts regarding flooding in the basement in violation of the VREBA.  The defendants’ counsel asked the court to dismiss that claim early in the case, arguing that VREBA provided recourse to an administrative agency, but did not create a private cause of action.  

Judge Hall disagreed, citing § 54-2142.1 of the act.  This section discusses the circumstances under which a broker would not be liable for providing false information, but ends with the statement “[t]his includes any regulatory action brought under the chapter and any civil action filed.”  According to Judge Hall, this closing language indicates the VREBA may contain a private cause of action, so she did not dismiss that claim, and ruled that it will go to trial. 

Judge Hall’s decision does not resolve this issue either way, but it is progress for proponents of the act.  And, both cases are a reminder to real estate professionals of the high standards to which they are held.

“Do more with less” is the battle cry for most corporate departments in the current economy. As budgets tighten, efficiency and effective spending are required. Your legal department is no different.

Let’s face it - no one wants to deal with lawyers, but just about everybody must deal with lawyers from time to time. Legal disputes are a norm in corporate life. Even in the absence of disputes, sophisticated companies actively seek legal advice in the planning and analysis stages of corporate development to reduce risk, and build a solid foundation for long-term growth. The young company needs advice to get organized for the long-term. The growing company needs solid structure and good corporate governance on which to build its future. And all companies need to understand risk. 

The biggest companies in the world have shown us the roadmap to long term stability: organization, efficiency, and preparation. The policies and procedures that make these companies powerful are every bit as necessary to the growing company because they reflect time-tested business principals. Too often, however, young and growing companies go without benefit of counsel because they either feel they can’t afford outside counsel, or have not yet reached the point where they are prepared to hire a full-time general counsel.

To solve this dilemma, many companies are turning to a hybrid solution – outside general counsel. Such programs strike a balance between the need for consistent legal advice and the cost of a full-time general counsel. 

The Outside General Counsel Concept:

Employing outside general counsel is simply outsourcing, just as you might outsource HR or employee benefit consultants, but with a few key distinctions. First, using outside general counsel is about value spending – spending less now to get the products and services you need to save more down the road. The need for quality legal advice is not lessened by tough economic times, in fact it may become even more critical in tough times. As budgets tighten, value spending becomes a critical tool in the CFO’s arsenal. Second, using outside general counsel is about developing relationships that help build your business and allow it to manage its legal budget more efficiently over time. Last, using outside general counsel forces you to get to know your own company, identify its future, and plan the path to that future.

So how does it work? Your company contracts with a law firm to establish a consistent legal presence in support of your day-to-day operations, working remotely or on-site depending on your needs, in exchange for a flat fee. During that time, the lawyer is solely dedicated to company business and operates just as a full-time general counsel would by working on specific projects, being available to provide advice as issues arise during your normal course of business, answering questions from your employees, and working on new initiatives and long-term corporate governance projects. By being on site and dedicated to your company, the lawyer gets to know your company quickly and thoroughly, and is thus well positioned to advise you immediately on legal developments affecting your business. The outside general counsel is responsible for advising on all company actions, drafting, implementing, and managing corporate governance policies, and managing the company’s legal affairs – the same role performed by a full-time general counsel. But because of flat-fee billing an outside general counsel will cost far less than a full-time employee.

Why Use Outside General Counsel?

Value Spending.

Managing legal costs does not mean cutting budgets to the lowest possible level or simply hiring the lowest-cost provider. Rather, managing a legal budget means getting the best value for each dollar spent on legal fees. Proper planning now can pay huge dividends later. Regular legal counsel helps companies understand and avoid risk, thus reducing the chance of litigation down the road. Avoiding a single litigation can save tens-of-thousands of dollars, making the money invested in corporate counsel money well spent.

One example of value spending is investing in the time to assess a litigation or potential litigation at the outset, and in context. This is true of any case, whether handled by inside counsel or an outside firm. But the context of that assessment is the key to its value. The company must understand the risks and benefits of a case in the context of the company’s business plan, reputation in the community, political implications, non-monetary costs, potential opponent strategy and how that may impact the litigation, and how the litigation or proposed litigation may fit with the company’s short and long-term goals. 

Counsel cannot provide that guidance efficiently unless they understand the company’s short and long-term goals, political interests, or reputation in the community. Truly understanding these matters takes time and can best be built through consistent interaction. So, the one-off litigation shop strives to understand these matters and thus guide the company as best it can. But the general counsel (inside or outside) already knows what matters most to the company, and can provide that initial assessment quickly, and in the proper context.

If a matter is large enough to require outside litigation counsel, for example, then the general counsel can help select a firm who will best suit the company’s needs and objectives. Selecting the largest firm or the most popular lawyer is not always the right fit. Reputation helps, sure. But size does not mean quality and certainly does not mean efficiency. Hiring a big firm does not always mean the company’s legal dollars will be well spent. In many cases, an experienced litigator at a lean shop is a far better option than a big firm lawyer with an army of hungry associates to feed. As an added benefit, the general counsel can also manage the litigation to ensure efficiency. The general counsel can draft discovery responses, for example, saving outside counsel fees. The general counsel also acts as a watchdog, guarding against excessive bills and thus relieving the company officers from the many headaches of managing litigation. An in-house general counsel provides these benefits to a company, but at the cost of a full-time employee. Companies can nonetheless achieve these same efficiencies, but at far less cost, by using outside general counsel.

Over time, a general counsel helps a company establish a work-product library of pleadings, research, discovery, and other litigation raw material gathered from other cases to be recycled in the future. The outside general counsel can help manage and deploy those resources to reduce the cost of future litigation. A general counsel can also conduct post-case analysis to help the company understand what worked and what did not. There are lessons to be learned from any engagement, and companies that strictly use outside counsel rarely invest the time or money to conduct this analysis and gather the maximum benefit from their legal dollars spent.

Perhaps the best example of value-spending is money spent on drafting and implementing corporate policies that both increase immediate efficiency and help avoid potential litigation. With the aid of outside general counsel, even smaller and growing companies can have effective document retention and destruction policies, for example, that can save thousands in litigation costs. Managing a legal budget, from the cost-containment point of view, is most effective when legal dollars are spent to help a company detect and avoid risk before it becomes a problem.

Relationship Building

Deploying your legal resources depends on your company objectives. Are you building for the long term, or are you interested in maximizing short-term profitability in the hope of a buyout offer? The answer likely impacts how and where you spend legal dollars. A company looking to the long-term wisely invests in corporate policy development and long-term corporate governance. The company with a short-term exit strategy needs enough organization to make an attractive acquisition target, but needs efficiency to reduce spending.

Employing outside general counsel brings consistent legal presence to your business that fosters relationship building as your company grows. In turn, your lawyer understands your business objectives and can help design and implement policies to help you reach them. Does your company need a HIPPA Compliance Program or drug and alcohol testing program? Do your hiring practices implicate the Fair Credit Reporting Act? Which programs do you need short term versus long term, and in what order should you implement such programs? The answers best come from someone with both the legal knowledge and the inside appreciation of your company.

Often attorneys are only employed in a crisis situation, and must attempt to steer your company without really knowing anything about your company or its people. Consider this example. A local consulting company provides two distinct types of online audit services – one for government programs and another for private programs. The company had already retained a local firm to act as outside general counsel, and turned to their lawyer to collect on a contract breach for early termination of a private-based audit services contract. In researching the potential defendant, the lawyer learned that most of the potential defendant’s business came through government-sponsored programs. Rather than file an immediate suit, the lawyer issued a letter proposing a meeting to discuss mutual termination of the private-based audit and transfer to a new government-based audit instead. The clients met, the business folks ironed out a deal in 3 hours, and all parties left happy with new business in hand. Perhaps that same deal could have resulted through mediation or settlement after litigation began, but because of the existing relationship between lawyer and company, they were able to get to that resolution before anyone incurred any litigation costs.

Using outside general counsel on a consistent basis fosters understanding between the lawyer and the company, so the lawyer can truly act in the company’s best interest when crisis arises. 

Get to Know Your Company.

An often-overlooked benefit of using outside general counsel arises from the attention that gets paid to the business-side of your business. When was the last time you reviewed or revised your bylaws? Do they meet your current operations parameters? Is your corporate book current with meeting minutes and resolutions covering significant changes to your company over the last year? Have you complied with corporate formalities to protect against owner liability?

Many developing companies are simply too busy actually operating their business to focus on infrastructure and administrative policies. In fact, many companies do not focus on such issues until they are forced to review and produce those policies in an audit or litigation context. Large companies with full-time general counsel (and staff) do not face these issues because their lawyers constantly review and update their policies. Smaller and mid-sized companies can obtain that same benefit by using an outside general counsel at a fraction of the cost. And, during that process, the company management will have the opportunity to review, analyze, refine, and thus improve its own policies to promote greater efficiency. Many companies find the process of looking “inside” hugely revealing. 

Corporate governance policies must change as the company grows. What happens when your business grows to the point where it needs a board of directors or employs more than 10 people and thus must meet certain labor standards? When those issues arise, your company can turn to an insider to help revise and refine your governance policies as needed to stay true to your goals without the same lead-time needed by an outside consultant.

In the end…

Your company will grow, and like it or not, you are likely to need a lawyer at some point. Don’t wait until a crisis to examine your risk profile, and don’t sink precious company resources into hiring a full-time general counsel until the size of your company supports that model. In the interim, using an outside general counsel will help your company seize all the benefits of consistent, competent legal advice at a rate well below what you would pay a full-time employee.

The Fair Credit Reporting Act (“FCRA”) requires an organization requesting a consumer report to notify the target of the organization’s intent to obtain the report.  Some internal auditors have expressed concern that compliance with the FCRA requirements gives targeted individuals the opportunity to alter or destroy evidence.

The FCRA defines “consumer report” to include background investigations reports, personnel and human resources data collection, witness statements, and any other report or collection of data pertaining to an individual.  And, under the FCRA no individual or organization may obtain a consumer report without first receiving the subject’s authorization before proceeding.

Internal auditors may not like alerting targeted individuals by seeking their authorization to investigate, but FCRA compliance does not mean disaster.  FTC opinions make it clear that organizations can obtain blanket authorization from their employees, provided that such authorization is specific, separate, and includes a list of the employee’s rights.  

Employers concerned with running effective internal investigations can meet authorization requirements by having all new employees sign an investigative authorization form upon hiring, indicating that the employee agrees to the company conducting background checks, credit checks, and similar reports containing personal information at various points throughout their employment.  This authorization should be distinct from the authorization to conduct a criminal background check as part of the hiring process.  

The authorization form should also include an explanation of the employee’s right to review and respond to any such report, and explain their appeal rights.  If a company intends to take any adverse action premised on the report, it should disclose the report to the employee along with the name of the reporting agency.  The investigator’s report is also potentially discoverable by the employee, so the company must be sure its reporting procedures are current, and that its reports are factual, accurate, complete, and balanced.

A well organized company with internal procedures that mirror current best practices can comply with the FCRA and still complete thorough, effective internal investigations.

The following questions often arise as companies consider whether and how to implement a corporate drug and alcohol test policy:

1. How should my company handle random testing? Each company should design its random testing to suit its needs; i.e. balance costs and work interruption against the need to monitor and enforce the policy.  The company must decide how often it will test, and how it will select employees for testing. As an example, the company may test all covered employees twice a year at specified intervals. The company could send two employees each week for testing, but any given employee would only be sent twice in a year.  If the company elects to place all covered employees in a random testing pool, it must ensure random selection.  This process should be documented and recorded.

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2. What if an employee refuses to sign the policy? The company must first have in place a policy that requires employees to sign a consent and acknowledgment form.  The company may then terminate an employee for refusing to sign an acknowledgment of the policy, provided that the employee has been warned in writing witnessed by others that discharge can result from refusal to sign.  An alternative to such a hard-line approach would be to hold a mandatory staff meeting, publish an agenda for the meeting showing as one of the items “distribution of new drug-testing policy”, have all employees sign an attendance roster or else face discipline for an unexcused absence, discuss and distribute the policy in front of witnesses, have employees sign the consent form, have a witness sign “employee refused to sign” on the consent form if an employee refuses to sign, and note in the minutes of the meeting that the policy was distributed to everyone in attendance.  This seems laborious, but following this example an employee would look unreasonable trying to claim that they were not given a copy of the policy or that they were unaware of what the policy required.

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3. Are the test results confidential? Yes.  Drug and alcohol test results are confidential.  The results from such tests are considered medical records and should be kept in a separate, confidential medical file just as other types of medical records.  The company should not disclose any test results without the employee’s written consent. The company may release test results as a result of legal process, for example if ordered by a court of appropriate jurisdiction, but even under those circumstances it must notify the employee in writing. The company should maintain accurate records regarding all testing procedures and test results in confidential form.

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4. Can my company test some, but not all, employees? Technically yes, but avoid this practice.  It can be legal to test some, but not all, employees.  The policy should cover all employees, and can be broken down into more specific job categories. For example, a company could make all workers who operate machinery or vehicles subject to drug testing, but not require testing of clerical staff.  Some employers test only those employees whose jobs are inherently risky.  The critical element is to decide who will be covered, and then to enforce the policy in an even-handed way.

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5. May my company conduct searches on its premises? The company’s office equipment, desks, filing cabinets, computers, etc., is company property (and should be noted as such in your written privacy policy), and your company has the right to access and search its property.  Employees generally have no reasonable expectation of privacy as to company property. The company should include a statement notifying employees that it can and may search its own property for any reason or no reason in its employee manual if it has not already done so. The company should refrain from searching personal belongings such as purses, backpacks, etc. The company may not search an employee’s car, even if it is parked on company property.

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6. What type of testing should be done? Initial tests or screens vary, and typically involve urine screens.   But in order to have the best chance of protecting the company against an unemployment claim, the company should request the testing facility confirm the initial positive result using the GC/MS method (gas chromatography/mass spectrometry). The GC/MS test is more expensive than the initial screen, but the company should be sure about the test results before making adverse employment decisions based on those results.

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7. More Questions? Contact us, we can help you design and implement a drug and alcohol test policy designed to fit your company's needs.

The past 5 years has seen a large shift from law firms’ most basic practice: hourly billing.  Big and small firms alike are increasingly offering alternative fee arrangements, such as flat-fee billing, due in part in the market’s response to ever-increasing billable-hour rates, and in part to savvy companies demanding more for their legal dollars. 

The Wall Street Journal recently reported that billable hour rates for top-billing partners at the country’s biggest firms increased 4.9% last year to an average of nearly $890 per hour.  The local DC market features hourly partner rates routinely in the $500-600 range, with some firms charging in excess of $400 per hour even for associates.  Figures like those send legal bills through the roof.

Add to that the continuing need to tighten budgets and squeeze every possible ounce of value from legal dollars spent, and you can see why so many companies are going away from the traditional use of outside counsel and the billable hour.

Many companies insist on alternative billing arrangements to lock in their costs.  Even large corporations are insisting that their lawyers – some of the biggest firms in the country – offer flat-fee billing and even contingency fee arrangements to reduce legal bills. 

In addition, companies are increasingly looking internally to fill their legal needs.  The Washington Post recently reported that businesses are relying less on outside counsel and more on internal resources, and that the percentage of companies using outside counsel for even specialty work like litigation, tax, mergers & acquisitions, and intellectual property have all decreased over the past 5 years.  Companies using in-house counsel instead of outside lawyers with high billable rates see significant cost-savings.  

Small and mid-sized companies can gain those same benefits even if they do not have expansive in-house legal departments or really any inside lawyers at all, by outsourcing their general counsel needs.  So-called “Outside General Counsel” programs combine the benefit of in-house counsel with alternative billing arrangements such as flat-fee billing to maximize savings for growing companies.  The company contracts with a law firm to service its legal needs for a set monthly fee, typically well below the cost of a full-time staff lawyer.  That way, those companies receive the full benefit of an in-house general counsel while still taking advantage of flat fee billing arrangements, resulting in the same cost-savings large corporations see when they rely on their in-house staff instead of outside billable lawyers.   And, by contracting with a firm, the company can tap into several lawyers’ areas of expertise, rather than relying on a single employee to cover all of their legal needs, again maximizing value in their legal budget.  

With more and more firms offering flat-fee arrangements, progressive companies are changing, and improving, the way they spend legal dollars at the same time they improve the quality of the legal services they receive.