SEPTEMBER-OCTOBER 2018 I love the IRS: read why on page 4mbfaa.com/resources/Documents/Security...
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SECURITY LINE A PUBLICATION OF THE METROPOLITAN BURGLAR & FIRE ALARM ASSOCIATION OF NEW YORK SEPTEMBER-OCTOBER 2018 MBFAA…Be a Part of It! SECURITY LINE I love the IRS: Restrictive Employment Covenant…page 6 read why on page 4
Transcript of SEPTEMBER-OCTOBER 2018 I love the IRS: read why on page 4mbfaa.com/resources/Documents/Security...
SECURITY LINE
MBFAA…Be a Part of It!
A PUBLICATION OF THE METROPOLITAN BURGLAR & FIRE ALARM ASSOCIATION OF NEW YORKSEPTEMBER-OCTOBER 2018
MBFAA…Be a Part of It!
SECURITY LINE
I love the IRS:
Restrictive Employment Covenant…page 6
read why on page 4
Page 3 Security Line SEPTEMBER - OCTOBER 2018
The Metropolitan
Burglar & Fire Alarm Association of New York, Inc.
P.O. Box 54 Brooklyn, NY 11204-0054Telephone: 718-894-6712
e-mail address: [email protected]
Alan GlasserExecutive Director
718-894-6712e-mail: [email protected]
Mike ZemeringPresident
718-894-6712e-mail: [email protected]
Ray VaranoVice President718-894-6712
e-mail: [email protected] Cohen
Immediate Past President718-894-6712
e-mail: [email protected] J. Gould
Vice President Membershipe-mail: [email protected]
Arnold BlumenthalSecretary/Treasurer
Publisher, Editor-in-chief516-292-0674
e-mail: [email protected] Lieberman
Board of DirectorsKirschenbaum & Kirschenbaum, PC
Legal Counsel/Member Board of Directors516-747-6700
Gary J. Schwartz, CPAAccountant
516-766-8482Donald Gumbrecht & Co.Design/Editorial Services
631-271-7467
In This Issue of Security Line
©2018 Metropolitan Burglar & Fire Alarm Association of New York, Inc. All rights reserved. The Publisher of this magazine is not responsible for any errors or omissions in advertising or advertising matters. Depiction, likenesses, drawings or photographs of any person whether living or dead, appearing in any advertising matters, is solely the responsibility of the advertiser. Submitted articles and Letters to the Editor are expressed opinions of the authors and are not necessarily the opinions of the Officers or Board of Directors of MBFAA or Security Line Magazine.
www.mbfaa.com
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Website
15 Nationwide Digital Monitoring Introduces New Program
4 I Love The IRS By Alan Glasser Executive Director, MBFAA
6 Legal Side: Restrictive Employment Covenant By Kenneth Kirschenbaum, Esq.
What is the Difference Between Right-to-Work Laws And Restrictive Covenant Enforcement By Kenneth Kirschenbaum, Esq
The Start of The Deal —Blackjack By Ron Davis
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Alan Glasser
Executive Director’s Message…
By Alan Glasser
I love the IRS! Yes I do!
I periodically receive e-mails from the IRS, “e-News for Small Business” and I can’t wait to open them up!
You see the IRS is there to HELP me succeed in business. (Perhaps the more money I make the more money they get from my taxes?) It’s a win - win situation.
Issue Number: 2018-35 - Inside This Issue 1.Several tax law changes may affect bottom line of many small business owners2.New tax law changes the backup withholding rate3.Treasury, IRS issue proposed regulations on new Opportunity Zone tax incentive
I reprinted article number 1 below so you have an idea of what to expect.
1. Several tax law changes may affect bottom line of many small business owners.
Tax reform legislation passed last December affects nearly every small business. With just a few months left in the year, small businesses and self-employed individuals have resources
I LOVE THE IRS! available to help them understand and meet their tax obligations.
Get more information about several changes that could affect the bottom line of many small busi-nesses, including:•Qualified business income deduction•Temporary 100 percent expensing for certain business assets• Fringe benefits◦Entertainment and meals◦Qualified transportation◦Bicycle commuting reimbursements◦Qualified moving expenses reimbursements◦Employee achievement award
But that’s not all! Here is a list of Tax Resources for Small Business:
Tax Resources for Small BusinessSmall Business and Self-Employed One-Stop ResourceSmall Business Forms & InstructionsSmall Business EventsSmall Business Webinarse-File for Businesses and Self-EmployedBusinesses with EmployeesSmall Business ProductsSelf-Employed IndividualsS CorporationsThere’s more! Here is a list of Other Resources:
continued on page 16
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Legal SideBy Kenneth Kirschenbaum, Esq.Kenneth Kirschenbaum, managing partner of the legal firm of Kirschenbaum & Kirschenbaum, P.C., is legal counsel to the Metropolitan Burglar and Fire Alarm Association of New York. Mr. Kirschen-baum’s offices are in Garden City, NY He can be reached at 516-747-6700, ext. 301. Email to: [email protected].
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I recommend that every one of your employees be required to sign our Employment Agreement. Enforcement may vary state to state, and we do try to customize the Employment Agreement to accommodate your state. Why an Employment Agreement is easy to explain, so you don’t have disputes regarding the terms of employment and, more importantly, terms affecting the employee after employment has terminated. Competition from a former employee who is in
possession of your confidential business records will happen only once before you are convinced that you should have had the Employment Agreement signed. But what about existing employees? Can you require them to sign an Employment Agreement without providing some consideration? Specifically, is “continued employment” sufficient consideration so that the Employment Agreement will be enforced? It’s not surprising that states deal with the issue differently, so enforcement of the Employment Agreement will depend on what state you are in and a bunch of other factors, such as reasonableness of any restrictive covenant, and specifically, whether you provided sufficient consideration for the employee’s agreement. I had one of our Employment Attorneys research the issue, and here is Jonathan Rogoff’s report. If you have employment law issues I suggest you contact our Employment Law Department, Jennifer Kirschenbaum,Esq at [email protected] or Jonathan Rogoff at [email protected].
What Consideration Do You Need To Require Existing Employee To Sign Employment Agreement With Restrictive Covenant
Page 8 Security Line SEPTEMBER - OCTOBER 2018
Employment Agreement Continued from page 6
The legal canvas is changing for restrictive covenants imposed on existing employees, with courts in several jurisdictions requiring something beyond continued employment as adequate consideration for a binding non-compete agreement. The consideration needed to satisfy this requirement can take various forms, such as a cash bonus, specialized training, a promotion, or a raise at the time the employee is asked to sign the non-compete agreement. Here’s a list of states that require something extra—beyond continued at-will employment for a binding non-compete agreement — Hawaii, Kentucky, Minnesota, Missouri, Montana, New Hampshire, North Carolina, Oregon, Pennsylvania, South Carolina, Texas, Virginia, Washington, West Virginia, Wisconsin, and Wyoming. In Missouri, for example, a federal district court held that at-will employment alone, or the continuation thereof, is insufficient consideration for a non-compete
agreement in that state, as the employer makes no “legally enforceable promise to do or refrain from doing anything that it is not already entitled to do” Durrell v. Tech Elecs. Inc. For midstream non-compete agreements to be enforceable in Pennsylvania, courts have specified that employers must provide “new” and valuable consideration. Examples listed by one court included “a promotion, a change from part-time to full-time employment, or even a change to a compensation package of bonuses, insurance benefits, and severance benefits” Socko v. Mid-Atl. Sys. of CPA Inc. A New York court refused to enforce a non-compete clause that was incorporated into a stock option agreement because it lacked adequate consideration. The court found that the agreement’s promise of continued employment was illusory and thus no right was ever conferred upon the employee NBTY Inc. v. Vigliante In North Carolina, a one-time payment of $500 has been deemed sufficient consideration for an existing employee’s non-compete agreement. Courts may also
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I had two alarm companies engage me to send cease and desist letters to their former employees. In one case I followed up with a lawsuit in which the offending former employee and new employer agreed to settle, agree to abide by the restrictive covenant in the ex-employee’s Employment Agreement and pay our client’s legal fees. In the other matter the ex-employee claimed he didn’t have to abide by the restrictive covenant in his former Employment Agreement because he was in a “right to work” state and therefore the restrictive covenant was not enforceable. Don’t confuse a right to work state with a state that won’t enforce a restrictive covenant. I had one of our employment law attorneys, Jonathan Rogoff,Esq., prepare a memo on the issue, and here it is:********** In the U.S., ‘right-to-work’ laws pertain to labor unions and workers at a company. Specifically, the right-to-work means that employees are entitled to work in unionized workplaces without actually joining the union or paying regular union dues. They may also cancel their union membership at any time, without losing their jobs. But they are still entitled to fair and equal union representation if they are part of a “bargaining unit” at the company—that is, a group of employees who have similar work duties, share a workplace, and have similar interests when it comes to wages, hours, and working conditions. In other words, right-to-work laws essentially require unionized workplaces to become “open shops,” where union membership is optional,
in contrast to the traditional “closed shop,” in which union membership is mandatory. While regular dues are not taken out of their paychecks, the right-to-work (nonunion) employees are still covered by the union; however, they might have to pay for the cost of the union representing them in specific ways, such as pursuing grievances on their behalf.Although it sounds similar, the right-to-work principle is not the same as employment at will, which means an employee can be terminated at any time without any reason, explanation, or warning; nor is it a guarantee of work or ruling that an employee is entitled to work. As of 2018, 27 states have adopted right-to-work laws: Alabama, Arizona, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Mississippi, Nebraska, Nevada, North Carolina, North Dakota, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin, and Wyoming. ‘Right to work’ laws and enforceability of restrictive covenant provisions in employment contracts are unrelated. Many employers utilize employment contracts which contain restrictive covenants in order to protect their legitimate interests in their customers and proprietary business information. Restrictive covenants in employment contracts are considered to be in partial restraint of trade and will be upheld if strictly limited: as to time; as to territorial effect, and are otherwise reasonable, considering the scope of the employer’s business
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By Kenneth Kirschenbaum, Esq.
What’s the Difference between ‘Right-to-work’ Laws and Restrictive Covenant Enforcement
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THE START OF THE DEAL Blackjack Everything you want to know about buy-ing, selling, financing, or even managing an alarm company By Ron Davis
I don’t gamble often, but when I do I like to play blackjack. It always amazes me how quickly a dealer can look at 2,3,4,5 or more cards and instantly know if they add up to 21. Dealers are so used to calculating the numbers needed to get to 21 that they do it intuitively.
Likewise, accountants or financial professionals can look at a financial statement and intuitively know the approximate value of the business. That includes calculating a multiple of recurring monthly revenue or a multiple of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amor-tization), which essentially determines a company’s cash flow.
Today, more and more deals are being done on the basis of a multiple of EBITDA, particularly if you are an integrator or have an integration portion of your business. Even when a transaction is based upon a multiple of RMR, it always translates to a multiple of earnings or cash flow, or profit of the business. Then, an add-back of owners expenses, including salaries, is applied to the formula and you have essentially, EBITDA.
It seems as though everyone in the alarm industry is interested in is buying, or selling, or financing alarm companies. My company, DAVIS MERGERS AND ACQUISITIONS GROUP is one of the leading brokers in the industry. We’ve done hundreds of transactions, and last year exceeded over hundred million dollars in transactions. We’ve been doing it for 20 years. The following article, as well as the articles that ap-pear in future publications, are all excerpts from the best-selling book THE START OF THE DEAL. Thou-sands of alarm dealers have requested this book, and many more are asking the questions that this book answers. Everything you want to know about buy-ing, selling, financing, or even managing an alarm company is pretty much contained within the covers of this amazing book. As you start reading some of the reprints, you’ll start to understand why. And at the end of this article, an amazing offer! Now, some interesting observations about Blackjack……
In today’s market, typically, the multiplier is somewhere between 3x and 6x…therein lies the single most negoti-ated point in a transaction. There could be hundreds of thousands, even millions of dollars at stake during such a negotiation. Arguments can be made as to what the add-backs are and there may be seller financing applied, but the range of multiples is always the same. There’s only one problem with all of this.
Typically, a small business person or in our case, an alarm dealer, is not particularly knowledgeable about what consti-tutes EBITDA, let alone how to determine a formula. And that’s where the job of a broker comes in. It also comes into play in selecting a transaction attorney who is knowledge-able about our industry. Between the two of us,we know how to structure the best deal for the best transaction.
This is particularly true if you are an integrator, of which there are increasingly larger numbers. Many people in the integration business look at how well they’re doing on the top line without paying attention to how they’re doing on the bottom line. But it’s the bottom line that counts, the top line is only one part of a fairly complicated formula.
If you’re an integrator, make sure you’re not fooling your-self into thinking that gross revenue translates into a suc-cessful bottom line. It may or it may not. Also, when you buy products for installation on your sales, take into account delays that may occur in your getting paid. It’s relatively easy to get in over your head, thinking that when the sale is concluded, and you are paid, that you are automatically making money.That may not always be the case, in fact, often the exact opposite happens. Delays in payment, bankruptcies, argu-ments about quality…almost any of these things could affect how much money you are actually making.
When you get that number, call us to find out how much your company is worth. It may be a surprise, even a pleas-ant one, but not always.
For over 45 years, Ron Davis has been helping alarm dealers get more out of their businesses. Ron has authored several books, is a featured columnist with SECURITY SALES AND INTEGRATION magazine, was in the first group of Hall of Fame inductees, and is one of the industry’s most sought after speakers. And now, the offer! Just email Ron at [email protected] and he will send you a signed copy of the book, THE START OF THE DEAL, at absolutely no charge. And if you have any immediate questions, just include those in the email, along with your order. We will ship it out to you, prepaid. •
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TEL:(718)435-2800FAX:(718)435-2818
• Full line of Burglar and Fire Alarm Systems •• CCTV Surveillance Equipment •
• Intercoms & Industrial Paging Equipment •• Central Vacuum Systems •
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DAVID FRIEDMANSales Manager
A L A R M D I S T R I B U T O R S
Alice Giacalone
consider the length of time the employee remained employed after signing the non-compete. At one extreme, an Illinois appeals court has held that an existing employee must receive at least two years of additional employment before a non-compete is enforceable. Fifield v. Premier Dealer Servs. Inc. At the other extreme, the Wisconsin Supreme Court has held that there is no minimum amount of additional employment required, but if an employer terminates an employee shortly after executing the non-compete the employee may be able to void the agreement based on fraudulent inducement. In Florida, Maryland, and Georgia, continued employment is adequate consideration to enforce a binding non-compete agreement. Courts may also consider the length of time the employee remained employed after signing the non-compete. In California - when it comes to restrictive covenants, California doesn’t just limit enforceability. The state prohibits non-compete agreements altogether, and, with recent law changes, it allows employees to sue an employer that tries to enforce a non-compete agreement against them. In Massachusetts a new law went into effect on
Oct.1, 2018 severely limiting the restrictions an employer can place on its employee. To be enforceable, the non-compete agreement must contain a “garden leave’ provision, whereby if the employer chooses to enforce the restrictions it has to pay the ex-employee 50% his highest base salary from the prior 2 years for up to one year. For midstream non-competes, employers and their counsel must pay close attention to the issue of what constitutes sufficient consideration in certain states, or they may find themselves unable to enforce an agreement that was supposed to provide protection against competitive threats posed by a departing employee.
Jonathan Rogoff, Esq.Kirschenbaum & Kirschenbaum PC
Employment Agreement Continued from page 8
Page 14 Security Line SEPTEMBER - OCTOBER 2018
interest sought to be protected and the effect on the employee. This three-element test has been described by the courts as a “helpful tool” in examining the reasonableness of the covenants being evaluated. The judge, rather than the jury, applies this test and determines whether the restraints are reasonable. “Covenants not to compete” or “non-competes” are the most common types of restrictive covenant in employment agreements. These provisions preclude the employee from competing with the employer and/or from working for a competitor of the employer for a period of time after the termination of employment.
from page 10The bottom line is that even if the employee is located in a ‘right-to-work’ state, those laws relate to the employee working in a unionized workplace without paying union dues, and do not allow the employee to breach the restrictive covenant provision, as long as the provision satisfies the three-element test described above.Employers must carefully craft employment contracts which contain non-compete, non-solicit, and non-disclosure provisions if the employer ever tends to legally enforce the agreement. Employers that elect to include broad restrictive language in employment contracts are likely to receive a hostile reception in the courts. •
What’s the Difference between ‘Right-to-work’ Laws and Restrictive Covenant Enforcement
Page 15 Security Line SEPTEMBER - OCTOBER 2018
Freeport, N.Y. - Nationwide Digital Monitoring has introduced a new program to help their dealers grow their business and increase their financial position over the year.
The new program is designed to successfully introduce and supplement ‘regular’ funding and financial programs.
Nationwide Digital MonitoringIntroduces New Dealer Program
The new funding program, according to Howard Avin of Nationwide, features flexible selling options providing renters a security solution that protects themselves and their property. The program also enables renter dealers to build longterm residential revenue in the marketplace.
Complete details of the new program can be obtained by contacting Howard Avin at Nationwide digital. (http://www.nationwidedigital.com/) •
MBFAA Stronger Together
Page 16 Security Line SEPTEMBER - OCTOBER 2018
718-236-0211718-236-0670
1-800-472-2078FAX: 718-259-3294
I Love The IRSfrom page 4
Other ResourcesIRS.govFind it Fast!All Forms and InstructionsFiling Your TaxesMake a PaymentTaxpayer Advocate ServiceRetirement PlansTax Information for Charities and Other Non-Profits
State LinksSSA/IRS ReporterIRS Social MediaSo how do you get this valuable information sent to your inbox? Or an app on your phone?
Subscribe to e-News for Small BusinessesCheck it out! WE ARE STRONGER TOGETHER THAN SEPARATE.“Be a part of it” the MBFAA
Alan Glasser,Executive Director, MBFAA…and Thank You!
