Covenant Not to Compete

If you own a successful business you must take steps to protect your investment.  Many companies spend countless hours and thousands of dollars training employees only to see them take off with customers, clients lists, other valuable employees, and directly compete using the knowledge they gained while an employee.   Even among common owners of a company, there are situations where one owner (typically a minority shareholder) will leave with devastating consequences to the business.   

In Kentucky, there is a relatively easy method to protect against these developments: an agreement containing a covenant of  Non-Compete, Non-Solicitation and Confidentiality.  These provisions should be standard in any Operating or Shareholder’s Agreement between owners  as well as in an agreement with all employees.  Obviously, the extent of any restrictions on using company information and competing for business will depend on the type of business, the level of employee, and  if ownership is involved. An Agreement to not compete and not use confidential information can be a condition to continued employment; accordingly, a business may ask all of its existing employees to sign such an agreement.

ENGINEERS: Avoiding “Plan Stamping”

“Plan Stamping” is the illegal and unethical use of a licensed engineer stamp to certify plans.  In
Kentucky, where there is only one stamp among all of the various disciplines, the opportunity for abuse is even greater.  Not only can an engineer use his stamp to certify plans not done by him, he can use it to approve plans outside his discipline. 

KRS 322.340 addresses the use of a stamp.  It specifically refers to the Kentucky Administrative Regulations for directions on how it is to be used.  Subsection 4 specifically states that a stamp and signature shall be used by licensees only if the work being stamped was under the licensee’s complete direction and control.  Subsection 7 addresses working with any engineer not licensed to practice in KY and states that the KY engineer shall check and have complete dominion and control of the design and engineering work which shall include possession of construction documents with all supporting calculations, indicating all changes in the design.  In order to properly stamp plans prepared by an employee, the engineer must exercise “ direct supervisory control.” as defined by the regulations.  If certifying another engineers work, he must comply with specific requirements in the Administrative Regulations. 

Violations of these statutes can result in criminal prosecution and loss or suspension of license.

SELLING OR BUYING A HOUSE: DISCLOSURE OF PROPERTY CONDITION

On November 23, 2005, the Kentucky Supreme Court issued an opinion which will have a dramatic effect on the sale of residential property in Kentucky. The law requires that the Seller complete a Disclosure of Property Condition form.  The disclosure is to be based on the Seller’s observation and knowledge and is not to be a warranty of condition.  However, in this case the Purchase Contract form provided that the Seller, “represents and warrants to Buyer” that the information was true and accurate and incorporated the terms of the Disclosure form. 

In the Disclosure form, the Seller did the right thing and disclosed that the basement leaked and the approximate dates it leaked.  The Buyer exercised her right to have a professional inspection done that revealed cracks in the basement wall which were of concern.  The Buyer bought the house aware of these conditions.   However, when she later experienced leaks, the Buyer sued the Seller for breach of warranty and fraud.

Without going into all the legal issues addressed by the Court, they held because of the use of the word “warranty” in the Purchase Contract, the Buyer had the right to have a jury determine if she had been defrauded.  It is noteworthy that Kentucky law does not require the Seller to give a warranty of the disclosures. If the Seller had simply indicated on the Purchase Contract the property was being sold without any warranties as to property conditions the Buyer would have no case. While I believe this decision is a unfair to the Seller and should have been dismissed it is now the law.

THE LESSON LEARNED: PROVIDING ACCURATE INFORMATION ON YOUR PROPERTY DISCLOSURE IS NOT ENOUGH; REVIEW THE PURCHASE CONTRACT TO MAKE SURE IT DOES NOT PROVIDE A WARRANTY ON THE PROPERTY CONDITIONS TO THE BUYER.  OTHERWISE, YOU COULD STILL FIND YOURSELF IN COURT.

“The Buck Stops Here”

Meaning: To take responsibility for something.Origin: Some card games use a marker called a buck. Players take turns acting as dealer with the buck marking the current dealer. When the buck is passed to the next player, the responsibility for dealing is passed.  Stopping the buck is to accept responsibility for dealing.  This phrase was popularized by president Harry Truman who kept a sign with the phrase inscribed on his desk and is a rebuttal to the older phrase “Pass the buck”.  The media interpreted Harry’s sign to mean he was accepting responsibility, but he may well have had something else in mind. Truman was a poker player. He knew exactly what the “buck” was — it was the marker that identifies the person who calls the game, or in essence, sets the rules. Truman may have been saying that he was in charge and would set the rules – a bit different than just accepting responsibility.   Source: Phrases and Origin

“The Buck Stops Here”

Meaning: To take responsibility for something.Origin: Some card games use a marker called a buck. Players take turns acting as dealer with the buck marking the current dealer. When the buck is passed to the next player, the responsibility for dealing is passed.  Stopping the buck is to accept responsibility for dealing.  This phrase was popularized by president Harry Truman who kept a sign with the phrase inscribed on his desk and is a rebuttal to the older phrase “Pass the buck”.  The media interpreted Harry’s sign to mean he was accepting responsibility, but he may well have had something else in mind. Truman was a poker player. He knew exactly what the “buck” was — it was the marker that identifies the person who calls the game, or in essence, sets the rules. Truman may have been saying that he was in charge and would set the rules – a bit different than just accepting responsibility.   Source: Phrases and Origin

Hello world!

Troutman & Hays has published a quarterly newsletter for their clients and friends for some time.  They offered educational information on various areas of law and also a bit of trivia on the origina and meaning of words and phrases.  The firm is growing and offering a more comprehensive array of services.  To keep up with this growth, this blog is dedicated to providing even more commentary and information on developing areas of Kentucky law.