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Beware! The “Other” Side of the LSRP Program Edward Hogan David Harmon Charles Miller Beware! The “Other” Side of the LSRP Program Edward Hogan David Harmon Charles Miller John Lushis, Jr. John Vanarthos Pat Collins The material provided herein is for informational purposes only and is not intended as legal advice or counsel.

Balancing the Risks, Responsibilities and Obligations of the LSRP Edward Hogan Balancing the Risks, Responsibilities and Obligations of the LSRP Edward Hogan

What Is New? • LSRP Role in Site Remediation • New Business Dynamic: 3 What Is New? • LSRP Role in Site Remediation • New Business Dynamic: 3 Parties – Client – Environmental Consulting Firm – LSRP 3

How Do You Manage? • LSRP Role – Training – Contract – Insurance – How Do You Manage? • LSRP Role – Training – Contract – Insurance – Use of Corporate Form 4

How Do You Manage New Business Dynamic • Contract – 3 Parties • What How Do You Manage New Business Dynamic • Contract – 3 Parties • What happens when the LSRP leaves Environmental Consulting Firm? – For current clients: Someone loses a client! – For former clients: Who keeps the files? 5

Protecting Your Business • Corporate Succession • Employee Handbooks and Employment Policies 6 Protecting Your Business • Corporate Succession • Employee Handbooks and Employment Policies 6

Keeping Key Employees Agreements with Employees/LSRP and Noncompete Issues – Protection of Company Assets Keeping Key Employees Agreements with Employees/LSRP and Noncompete Issues – Protection of Company Assets and Retention of Talent David Harmon

Retention, Protection and Enforcement EMPLOYEES TRADE SECRETS, CONFIDENTIAL/ PROPRIETARY INFORMATION, FILES AND RECORDS LSRP Retention, Protection and Enforcement EMPLOYEES TRADE SECRETS, CONFIDENTIAL/ PROPRIETARY INFORMATION, FILES AND RECORDS LSRP COMPANY COMPETITION COURTS CUSTOMERS 8

Take Your Employment Temperature Ask the following questions regarding the LSRP, your employees and Take Your Employment Temperature Ask the following questions regarding the LSRP, your employees and your business: Who? What? When? Why? How? 9

Ask These Questions While Considering the Importance of: • Protecting company assets and customer Ask These Questions While Considering the Importance of: • Protecting company assets and customer relationships, retaining key employees, and safely engaging the LSRP. 10

Who? What? When? • WHO does my company need? From whom does the company Who? What? When? • WHO does my company need? From whom does the company need protection and ongoing loyalty? Executive, LSRP and rank and file employees privy to trade secrets and confidential/proprietary information, including customer relationships. Protection from competitors is critical. • WHAT can we do to keep key people and protect the company from theft of data, confidential and proprietary information and interference with employee, consulting and customer relationships? What happens when the LSRP leaves or completes the engagement? Create binding contracts that impose reasonable restrictions on activity both during and after the employment and consulting relationships. • WHEN does this come into effect? Put agreements into effect at the commencement of employment and/or consulting arrangements. Or, for employees make them concurrent with reviews and 11 increases in compensation/benefits.

WHY? – Just a Few Reasons: • • Costs/losses incurred by companies. Increase of WHY? – Just a Few Reasons: • • Costs/losses incurred by companies. Increase of theft by employees during recession. Security of company assets and retention of files. Provide protection from competitors poaching employees and theft of information and relationships. • Put your employees and the competition on notice and create right to bring claims against departing employees/LSRP for breach of contract and against your competition for tortious interference with your contracts. 12

How? • Create agreements. • Provide adequate consideration to make sure the agreements are How? • Create agreements. • Provide adequate consideration to make sure the agreements are enforceable. • Create employment practices and policies that dovetail with your agreements. • Enforce those agreements. 13

Agreements with Employees and Consultants • Employment Agreements/Consulting Agreements (key executives, LSRP) • • Agreements with Employees and Consultants • Employment Agreements/Consulting Agreements (key executives, LSRP) • • Confidentiality/Non-disclosure Agreements Non-solicitation Agreements (Non-poach/raiding) Non-interference Agreements Non-competition Agreements (reasonable in scope, duration and geography) • Non-disparagement Agreements (including “no kiss and tell” covenants) • Return of Materials Agreements • Invention Assignment Agreements (Work for Hire) 14

Retention, Protection and Enforcement EMPLOYEES TRADE SECRETS, CONFIDENTIAL/ PROPRIETARY INFORMATION, FILES AND RECORDS LSRP Retention, Protection and Enforcement EMPLOYEES TRADE SECRETS, CONFIDENTIAL/ PROPRIETARY INFORMATION, FILES AND RECORDS LSRP COMPANY COMPETITION COURTS CUSTOMERS 15

Professional Liability Insuranceand Beyond Charles Miller Professional Liability Insuranceand Beyond Charles Miller

Commercial General Liability Insurance • Cover bodily injury and property damage claims • Exclude Commercial General Liability Insurance • Cover bodily injury and property damage claims • Exclude coverage for professional liability claims • Exclude coverage for pollution claims 17

Professional Liability Insurance • Generally claims-made policies • Retroactive date- KEY! • Unique LSRP Professional Liability Insurance • Generally claims-made policies • Retroactive date- KEY! • Unique LSRP issues 18

Pollution Legal Liability Insurance • For the site owner • Protects insured against unanticipated Pollution Legal Liability Insurance • For the site owner • Protects insured against unanticipated losses associated with pollution conditions arising from: – Unknown contamination (existing from past incidents but not yet discovered) – New issues from known contamination (i. e. new regulatory requirements) – New pollution releases 19

SRRA Why worry with LRSP issuing RAO? • DEP has up to 3 years SRRA Why worry with LRSP issuing RAO? • DEP has up to 3 years to audit RAO • Can audit beyond 3 years if: – Undiscovered contamination is found on RAO site – Board conducts investigation of LSRP – LSRP has had license suspended or revoked N. J. S. A. 58: 10 C-25 20

SRRA • DEP can rescind RAO if remedial action may no longer protect public SRRA • DEP can rescind RAO if remedial action may no longer protect public health and safety N. J. A. C. 7: 26 C- 21

LSRP Risk Management • • Limitation of liability clause in contract Re-evaluate insurance Carefully LSRP Risk Management • • Limitation of liability clause in contract Re-evaluate insurance Carefully prepare PL application Review policy and endorsements Maintain PL coverage – with retro date! If closing business, purchase ERP/tail Pollution coverage for property owner 22

Key Person Insurance How much? Formula or salary multiple? Push for a realistic value Key Person Insurance How much? Formula or salary multiple? Push for a realistic value 23

Limited Liability by Corporate Formalities John Lushis, Jr. Limited Liability by Corporate Formalities John Lushis, Jr.

Why Form an Entity? • Forming an entity affords the LSRP liability protection in Why Form an Entity? • Forming an entity affords the LSRP liability protection in the event a problem arises (e. g. , litigation) and specifically protects the LSRP’s personal assets (e. g. , house, bank accounts, etc. ). • While liability insurance affords the LSRP protection, without an entity, the LSRP could still have personal liability if damages exceed the amount of the insurance proceeds, the matter is excluded from policy coverage or a dispute arises with the insurer. • Forming an entity is relatively inexpensive; i. e. , the benefits substantially outweigh the costs. 25

What Entity? • Several different entities can provide liability protection. • The entity typically What Entity? • Several different entities can provide liability protection. • The entity typically formed is a corporation (stockholders), a limited liability company (members) or a limited partnership (limited partners and general partner). A general partnership is not preferred because the general partner is liable for the obligations of the partnership. • Selection of entity will depend on various factors, most notably tax considerations for the particular LSRP, the nature of the assets owned by the LSRP (e. g. , land buildings vs. personal property) and the degree of sophistication of management (e. g. , sole member vs. Board of Directors). 26

Documents: Corporation Articles of Incorporation • Sometimes referred to as the “corporate charter” these Documents: Corporation Articles of Incorporation • Sometimes referred to as the “corporate charter” these documents specify the corporate name, address, the term of existence, and the type and number of shares of stock issued. This is filed in the Secretary of State’s Office in Trenton. By-laws • These documents outline the manner in which the Corporation is to be governed and contain provisions relating to directors and officers and their responsibilities, meetings, and voting. Directors are selected by the stockholders and officers are selected by the Board of Directors. Naming directors and officers is critical. 27

Documents: Corporation Shareholders’ Agreement • This document outlines rights and obligations with respect to Documents: Corporation Shareholders’ Agreement • This document outlines rights and obligations with respect to the purchase and sale of shares in the event a stockholder desires to sell his interest, terminates his employment, dies, becomes disabled or becomes involved in a legal proceeding such as bankruptcy or divorce. Specifically, the agreement will specify who has the right to purchase and at what price. 28

Documents: Limited Liability Companies Certificate of Organization • Similar to the Articles of Incorporation Documents: Limited Liability Companies Certificate of Organization • Similar to the Articles of Incorporation and filed in Trenton. Operating Agreement • This document outlines the governance of the company and also contains provisions relating to buy-sell rights similar to those found in a shareholders’ agreement. 29

Documents: Limited Liability Companies Operating Agreement (continued) • LLCs can be managed in one Documents: Limited Liability Companies Operating Agreement (continued) • LLCs can be managed in one of two ways: by all of the members or by one person who is designated as a manager. The manager’s responsibilities are specifically outlined in the Operating Agreement (e. g. , right to execute contracts, open bank accounts), but certain extraordinary transactions will require approval by a certain percentage of all members (e. g. , sale of the company). • LLC requires less documentation to form than a corporation 30

Documents: Limited Partnership Certificate of Partnership or Formation • Similar to the Articles of Documents: Limited Partnership Certificate of Partnership or Formation • Similar to the Articles of Incorporation and filed in Trenton. Partnership Agreement • This document outlines the governance of the partnership and also contains provisions relating to buy-sell rights similar to those found in a shareholders’ agreement. • A limited partnership has at least one general partner. Because of liability concerns, the general partner is often a limited liability company that owns 1% partnership interest and the members of this limited liability company are the limited partners. 31

Compliance Complying with the provisions of governing documents is critical to avoiding potential arguments Compliance Complying with the provisions of governing documents is critical to avoiding potential arguments that the entity is not legitimate. 32

Corporate Maintenance and Tune Up John Vanarthos Corporate Maintenance and Tune Up John Vanarthos

I. Operating as a Corporation 1. Governing Bodies • Shareholders • Board of Directors I. Operating as a Corporation 1. Governing Bodies • Shareholders • Board of Directors • Officers 2. Documenting Corporate Action • Authorizing Resolutions • Delegations of Authority for Officers/Key Employees 3. Meetings • Annual/Periodic Meetings 4. Proper Record Keeping • Minute Book/Stock Ledger 5. File Annual Report With Department of Treasury Note: * These Requirements Apply to All Corporations Regardless of Size/Number * The Formalities Really Matter * Failure to Comply Creates Risk of Losing Corporate Shield From Individual Liability 34

II. Corporate Maintenance 1. NMM Corporate Tune-Up • Review and update corporate book/stock ledger II. Corporate Maintenance 1. NMM Corporate Tune-Up • Review and update corporate book/stock ledger • Limited liability and indemnification provisions • Defining the Role of the LSRP * Conflict of Interest Issues * Limit Company Liability for LSRP’s Legal Responsibilities 2. NMM Corporate Maintenance Program • Designed to help maintain corporate records on an ongoing basis and include: ü Preparation of annual corporate consents ü Updates to corporate minute book throughout the year ü Acting as registered agent ü Guidance with filing of NJ Annual Report ü Meet with you once per year to discuss tax or business planning concerns • Annual Fee of $350 • Enrollment may be cancelled at any time 35

III. Corporate Succession Planning 1. Shareholder (Operating) Agreements • Restrictions on transfer or issuance III. Corporate Succession Planning 1. Shareholder (Operating) Agreements • Restrictions on transfer or issuance of stock/equity • Buy/Sell Provisions - Upon death/retirement/termination - Planning your exit strategy - Planning for your partner’s exit • Key-Person Life Insurance 2. Coordinating with Estate Planning • Permitted transfers to family members/trusts • Marital status 36

Business Continuity Insurance Charles Miller Business Continuity Insurance Charles Miller

Life Insurance 1. Buy-sell agreement - set up by Owners. 2. Life insurance fund Life Insurance 1. Buy-sell agreement - set up by Owners. 2. Life insurance fund the buy-sell. 38

Life Insurance Advantages • Maintains business intact • Provides heirs with prompt payment of Life Insurance Advantages • Maintains business intact • Provides heirs with prompt payment of agreed-upon amount of cash • Avoids disputes between heirs and surviving owners • Helps settle estate quickly 39

Key Person Insurance An insurance policy taken out by a business to compensate that Key Person Insurance An insurance policy taken out by a business to compensate that business for financial losses that would arise from the death or extended disability of the member of the business specified in the policy. 40

Key Person Insurance Why? To compensate the business for its losses and to facilitate Key Person Insurance Why? To compensate the business for its losses and to facilitate business continuity when that key person is lost to the business 41

Key Person Insurance Who? Death or disability would be a financial detriment to the Key Person Insurance Who? Death or disability would be a financial detriment to the company 42

Key Person Insurance What is covered? 1. Replacement costs 2. Lost profits 3. Shareholder Key Person Insurance What is covered? 1. Replacement costs 2. Lost profits 3. Shareholder protection 4. Guarantee coverage 43

No Excuses! No Surprises! – Employee Handbook and Employment Policies Pat Collins No Excuses! No Surprises! – Employee Handbook and Employment Policies Pat Collins

Key Issues • • • EEO – Discrimination Prohibited Anti-Harassment Employment At-Will Benefits/Payroll Administration Key Issues • • • EEO – Discrimination Prohibited Anti-Harassment Employment At-Will Benefits/Payroll Administration Privacy Expectations General Work Rules 45

N. J. Law Against Discrimination (“LAD”) N. J. Conscientious Employee Protection Act (“CEPA”) • N. J. Law Against Discrimination (“LAD”) N. J. Conscientious Employee Protection Act (“CEPA”) • Extremely liberal interpretation – Easier administrative process. No caps on damages. • • Lower thresholds than federal laws Allows suits against individuals Broader scope of protected classes under LAD CEPA “Reasonable Belief Standard” 46

LAD • Applies to employers, individuals, and “any person who aids, abets, or otherwise LAD • Applies to employers, individuals, and “any person who aids, abets, or otherwise assists” in prohibited conduct. • Makes it unlawful to refuse to buy from, sell to, license, contract with or provide goods or services to anyone on the basis of a protected class. • Prohibits harassing conduct by third parties (Visitors, customers, vendors, LSRP’s). CEPA • Applies not only to employees, but independent contractors as well. 47

EEO – Non-Discrimination – Anti-Harassment Policies • Written Policy Mandatory in NJ – Presumed EEO – Non-Discrimination – Anti-Harassment Policies • Written Policy Mandatory in NJ – Presumed negligent without one • • Training of Managers Mandatory in NJ Risk Losing “Employer Defense” Employee Liability Good Business Practice 48

Employment At-Will No Contracts • • Policy emphasized repeatedly Introductory Disclaimer At-Will Statement Benefits Employment At-Will No Contracts • • Policy emphasized repeatedly Introductory Disclaimer At-Will Statement Benefits Disclaimer Codes of Conduct Discipline & Termination Signed Acknowledgement 49

Benefits/Pay Practices • Disclaimer – “The Company reserves the right to amend or terminate Benefits/Pay Practices • Disclaimer – “The Company reserves the right to amend or terminate any of these programs and to require or increase premium contributions toward any benefit programs in its discretion. ” • Benefit Explanations • Leaves • Pay Practices – Safe Harbor Language • Hours of Work – Employee Classification – Overtime Policy 50

Privacy Expectations • • • Confidentiality Issues Conflicts of Interest Company Property/Trade Secrets Employee Privacy Expectations • • • Confidentiality Issues Conflicts of Interest Company Property/Trade Secrets Employee Reference Requests Medical Information Company Investigations 51

Privacy Expectations • • Drug and Alcohol Testing Searches Internet and Electronic Media Social Privacy Expectations • • Drug and Alcohol Testing Searches Internet and Electronic Media Social Media and Networking – Cell phones, Blackberrys, Smartphones – Facebook, Linked. In, Twitter 52

General Work Rules • Moonlighting • Jury Duty • Emergency Procedures • Personnel Files General Work Rules • Moonlighting • Jury Duty • Emergency Procedures • Personnel Files • Tuition Assistance • Office Supplies/Machines • Office Hours • Dress Codes • Mail/Telephones • Inclement Weather • No Smoking • Media Contacts • Comp Time • Weapons • Inventions • Direct Deposit • Violence • Gifts • Performance Reviews • Solicitations • Customer Relations • Vacations • Bulletin Boards • Arrests/Convictions • Sick Days • Radios • Garnishments • Holidays • Layoffs • Expenses • Safety • Resignations • Language • Workplace Injuries • Terminations • Nepotism • Family Leave Issues • Exit Interviews • Grievance Procedure • Military Leave • Office Searches • Open Door Policy • Bereavement Leave • Visitors • Interns/Trainees 53

Question & Answer Session Thank you for coming! Question & Answer Session Thank you for coming!