Thursday, June 28

Slashing Red Tape

Most times, complaining about the government is about as useful as complaining about the weather. The fellows who run either operation are just too remote for it to do any good. But this time the New Jersey Small Business Administration has tried to lasso the whirlwind and bring it up close enough for your complaints to be heard — and your problems solved.

The SBA’s Regulatory Fairness Forum for Small Business opens up its doors to your gripes and problems with respect to governmental regulations on Thursday, June 28, at 10 a.m. at the Middlesex County Regional Chamber of Commerce offices at 1 Distribution Way, Monmouth Junction. All are invited to attend this free event, but if you want to testify please contact Harry Menta, the NJSBA’s information director at 973-645-6064 or harry.menta@sba.gov.

Those wishing to remain anonymous may send in written testimony to New Jersey Small Business Administration, c/o Harry Menta, Two Gateway Center, 15th Floor, Newark, 07102.

District SBA director James Kocsi, who acts as forum moderator, stresses that this session is only to deal with federal agencies and regulations. Please save state and municipal issues for another time.

This is a lot more than just a gripe session. The Regulatory Fairness Forum has been designed to rectify individual problems through personal testimony. “If we have notification of testimony ahead of time, we will bring in representatives from the specific agency with which you’re having trouble,” says Menta, “and you can work out the problem right there.”

Also, the SBA’s national ombudsman, Nicholas Owens will be on hand to bring a little federal-level clout in pushing for solutions. Owens works directly with 35 federal offices to resolve complaints about excessive enforcement of regulations. Owens’ office also reports incidents of injurious regulations or overzealous enforcement to Congress.

The national ombudsman’s office came into being in l996 with the passage of the Small Business Regulatory Enforcement Fairness Act. The office’s fifth ombudsman, Owens was named to the position in April, 2006. A native of Wiggins, Mississippi, Owens founded the Nicomm Group in his home state, helping clients with public affairs and governmental relations. In 2000 he served as vice-president of sales and marketing for Nashville-based Healthcare Technology Solutions Corporation. Most recently, Owens worked with the National Credit Union Administration, where he launched its “Access Across America” economic empowerment initiative.

Pick a nemesis. At the upcoming forum, depending on testifiers’ complaints, Menta plans to bring on board representatives from OSHA, EPA, FDA, Homeland Security, and even the IRS. In past regulatory fairness forums, many employers brought up grievances with the immigration department concerning the hiring of illegal aliens. While ignorance of the law may be no excuse, if an employer is deceived and unaware of his employees’ status, inflicting the full penalty for fugitive harboring seems more than a trifle harsh, they have complained.

Realizing this, the immigration representatives have proved quite flexible. “We even had one woman in our last forum who squared off with the IRS and won,” says Menta. “She was being penalized for unsubmitted forms, brought in all her papers, and made them finally listen to reason.” Such a history of results, he expects, should pack the hall.

Grievances are typically resolved within 30 days, except of course for the IRS issues, which take longer, as ombudsman Owens puts it, “because of increased complexity.”

Timely resolutions. Beyond this single forum, the Office of the National Ombudsman maintains a website (www.sba.gov/ombudsman) where America’s 25 million small business owners can receive online help directly. The site lists some of the questions and cries for help Owens and his staff receive. A few favorites include:

“We are being eaten alive by insurance, workers comp, accountants, you name it…”

“I have just been called to serve in the National Guard. How can I preserve my small business during my absence?”

“How do I get certification for a minority business?”

“We are a small economic development authority in Tianjin, China, and are looking to partner with USA companies…”

“I am a small business, and government regulations are driving me out of business…”

Throughout history government bureaucracies have been the bane of business. But here and now, for one of the vary rare moment in that history, the government actually recognizes the burden and cares. Business is seen not merely as an annoyance and a taxable resource, but as a life blood.

— Bart Jackson

Friday, June 29

Consumer Laws Also Benefit Businesses

It was a summer job at age 18 that got William Pinilis, partner in Morristown-based law firm Pinilis Halpern, interested in law — but not the sort of summer job you might think. Pinilis had gotten a real estate license to work in his father’s real estate firm. After he negotiated and finalized a deal to re-lease a retail location to a children’s clothing store, the landlord refused to pay the commission of $10,000, of which he was entitled to $5,000.

To a college student “that was a lot of money and would have bought a lot of beer,” says Pinilis, so “I went in to my dad and said, ‘We’re going to sue him, right?’”

His father’s response surprised him: “No, we can’t find a lawyer to take a $10,000 case on a contingency fee, and it doesn’t make sense to pay one by the hour.” Basically, they were going to swallow the loss.

Pinilis never forgot the indignity of unfairly losing $5,000, and not being able to do anything about it. “I’m sure that on a fundamental level that experience is one of the things that got me interested in consumer cases, and is one thing I like about them,” he says. “I can really help people and actually get paid for doing it.”

Pinilis’s received a bachelor’s degree in political science from Hobart College in 1989 and a law degree from the Cardozo Law School of Yeshiva University in 1992.

Shortly after he started to practice law, he worked at a plaintiff’s firm and handled a significant consumer class action. That completely hooked him.

In his Morristown practice, he handles commercial litigation as well as consumer fraud cases. He is a certified civil trial lawyer, a designation carried by less than 3 percent of New Jersey lawyers. He is also an adjunct professor of law at Seton Hall Law School, where he teaches, among other things, consumer law.

Pinilis moderates a half-day continuing education class on “Consumer Protection Litigation Essentials” on Friday, June 29, at 9 a.m. at the New Jersey Law Center in New Brunswick under the auspices of the New Jersey Institute for Continuing Legal Education. Speakers include Mark S. Melodia of ReedSmith; Cindy K. Miller, chair, New Jersey Small Business Administration Consumer Protection Law Committee; Elliot D. Ostrove of Day Pitney; and Jonathan Rudnick of Rudnick Addonizio Pappa & Comer. Cost: $199. For more information or to register, go to www.njicle.com.

“New Jersey has one of the most consumer-friendly statutes in the country,” Pinilis says. This protection flows from the New Jersey Consumer Fraud Act. Additionally, important decisions every year by the judiciary and determinations by the division affect consumer protection.

The act and the agency it created affects the businesses that serve the public, and especially every business that sells either merchandise or services. The only exceptions are the so-called “learned professionals,” like medicine and law.

Despite requirements imposed by the act, Pinilis sees it as being pro business “because it encourages, in fact mandates, an even playing field for legitimate businesses.” In rooting out fraud, he says, it rewards honest business people, protecting them from having to engage in unfair business practices to compete effectively with the unscrupulous ones.

The Consumer Fraud Act also works in conjunction with federal and other state consumer statutes to require disclosure of consumer transactions with respect to mortgages, car loans, and warranties — so that consumers can make educated decisions.

“It sort of follows the Sy Sims school of business,” says Pinilis, “that the educated consumer is the best customer.” Mandated disclosure, he says, means “an educated marketplace, which creates an efficient market that fosters good, old-fashioned, healthy competition among businesses.”

An important means of empowering the consumer is the concept of the “private attorney general” created by the act. Prior to 1971 the only person who could file a consumer fraud case was the attorney general. Then legislators slowly began to realize that the attorney general could not be expected to prosecute every case of fraud — particularly cases that involved a small amount of money or affected only a small group of people.

So in 1971 Governor Cahill amended the Consumer Fraud Act to create a “private right of action,” allowing consumers to file cases through private attorneys. Pinilis explains that the mandated fees give attorneys an incentive to take the cases and encourages victims to file because of treble damages.

Pinilis cites examples of some specific business sectors influenced by New Jersey’s consumer law and regulations:

Home improvement contractors. Regulations of the Division of Consumer Affairs specify exactly what these contractors “can, can’t, must, and must not use,” says Pinilis. “Many are not aware of these (requirements) and violate them all the time, and a violation of a regulation is per se a violation of the Consumer Fraud Act itself.”

Pharmaceutical companies. Pharmaceutical companies may be liable for class action suits because of representations made in their advertisements about the efficacy or safety of their products.

Software companies. Technical companies can get themselves into trouble by releasing software when it is still bug ridden. They are aware of the bugs, says Pinilis, but feel pressured to release the software anyway. But from a legal perspective, when they do so, they are making a representation that it is fit for its intended purpose and works, and they know it doesn’t.”

What they are really doing, he observes, is “using the consuming public as their R&D department.” They set up an 800 number to field calls from consumers and use the information they acquire to fix the bugs.

Pinilis recalls a case he was involved in years ago against a gaming manufacturer. The company had released a video game, one of whose promised functions was to enable remote play against other players. “At the time it was released,” says Pinilis, “they knew that there were significant problems with that function, but also knew that most people wouldn’t use it.” They released the product anyway and fixed the problem over time. The company decided to settle in response to the class action suit.

This is not an uncommon practice among software companies, Pinilis observes, “and it’s not fair to the company that doesn’t do that.” Then he suggests a scenario: Imagine you are a company that doesn’t do business that way, and you don’t know that a competitor is developing the same program. The competitor releases the program, with bugs, and gains a foothold in the marketplace while you are toiling in your lab to develop it the right way. — Michele Alperin

Monday, July 2

A New Take On

Immigrantion Law

David Nachman, of Nachman & Associates in Morristown, has an interesting take on immigration law. “When I come to the office,” he says, “I don’t perceive my job as bringing a person into the U.S.” Rather, he envisions himself as helping corporations get the scientific and technical expertise they need. He likes to describes himself as “the instrument of global competitiveness.”

Nachman was born and raised in Teaneck, where his father was a business executive and his mother manages commercial real estate. Nachman graduated from Georgetown University in 1985 with a degree in forensic psychology and from Case Western University in Cleveland with a law degree and a master’s in business administration.

Back in New Jersey, he started out as a corporate lawyer, noting that “immigration law was a complete accident.” In 1989 he had been handling securities and stock transfers when a partner came to him with an immigration issue that was corporate related. It was at a time when the law was changing, and as Nachman read through everything he could find, he realized that he really liked the field. In 1993 he opened his own firm.

Nachman moderates day-long continuing education seminars discussing the comprehensive immigration reform bill under consideration by Congress and other changes in the law, with speakers from the Citizenship and Immigration Service and from Customs and Border Protection, on Monday, July 2, at 9 a.m. the DoubleTree Guest Suites Hotel in Mount Laurel, and on Wednesday, July 11, at the New Jersey Law Center in New Brunswick, also at 9 a.m. Cost: $219. Visit www.njicle.com to register.

Nachman reviews a number of current immigration issues that are affecting employers in the United States:

Increasing costs. On July 31 the fees that foreign nationals will pay for various petitions and applications to government agencies will increase by nearly 80 percent. The Citizenship and Immigration Service, which is part of the Department of Homeland Security, justifies the increase by saying that it can’t get appropriations from Congress, and therefore must self-fund in order to launch itself into the 21st century.

Nachman, on the other hand, believes that the service can request appropriations from Congress, but is not doing so. “My opinion is that they want everything to come out of the pockets of foreign nationals and the employers of those foreign nationals,” says Nachman, “We’re not living in an immigration friendly world — and that’s the understatement of the century.”

Considering a merit-based system. There is sentiment in favor of revamping the employment-based immigration process and changing it to a merit-based system. Being considered in the comprehensive immigration bill before Congress is a merit system like the one that exists in Canada, based on points for fulfilling certain characteristics.

In Canada, for example, points are assigned for being able to speak French, having a job, and having a specific skill. “The problem,” says Nachman, “is that when you sit down and run the numbers, it turns out that people who are nannies and doing home care are outranking cancer researchers and people adding significant value to the infrastructure in the United States.”

If we throw out the employment-based process, then business may not be able to hire the skills it needs. “We in the United States take advantage of certain individuals in the foreign work pool who have skills that no one else in the world has,” Nachman says. He cites skills in both specialized computer applications and research protocols, adding that we need foreign workers who are highly educated in mathematics and the sciences.

Getting all of the H1B nonimmigrant visas business needs. These visas are for highly skilled workers in professional and specialty occupations, and the United States risks a lot by not favoring these types of skill sets that its businesses need, says Nachman.

But the proposed immigration bill increases the fee for an H1B visa to $10,000 plus a $3,000 filing fee. Nachman doesn’t think it’s necessarily unfair to increase employers’ costs in obtaining these visas, but observes that the increase is substantial. “The government is telling employers to put their money where their mouths are,” he says. “If you want these visas, you will have to pay for them.”

Other countries rush in to lure skilled immigrants. Since Congress has closed up the opportunities for a skilled individual to enter the United States quickly, says Nachman, “my job is to bring the person to the U.S. before he takes advantage of the lax immigration laws in Japan, Australia, or Ireland.”

Ireland, he says, is trying to become the next Silicon Valley. In Dublin the coupling of new high-tech companies with opened-up immigration laws means that if we tighten up our immigrant laws, we will lose skilled people to Ireland. “When those people go to work,” he says, “they are developing infrastructure and developing jobs in Ireland and taking away jobs in the U.S.”

The government is also talking about creating STEM visas, for workers highly skilled in math and science visas, but this is taking the back seat, says Nachman, to merit-based procedures and interior enforcement.

Subverting the secondary market in labor certification applications. Two measures are being considered. The first requires employers rather than individuals to bear the cost of these applications, which are one path to getting a green card. The second bans a procedure called substitution, in which employers were able to substitute individuals onto previously approved certifications. The procedure made sense because employers tend to hire a particular skill set as much as they are hiring individuals. Nachman has not seen evidence of the secondary market that the United States Department of Labor alleges.

Implementing the interior enforcement initiative. According to Nachman, the government used to prefer education, but is now leaning toward prosecution. The attitude, he says, is “now we’re done educating, we’re going to enforce. They have moved from a civil liability to a criminal angle.” He cites several large companies that have been effected, including Swift, Tyson’s Foods, and Wal Mart.

Through work site raids the government is attacking businesspeople who use illegal workers knowingly to undercut the economic markets in the United States and thereby depress wages, says Nachman.

Employers are in a bit of a quandary, though. Employers have been required to submit I-9 forms for every employee since the 1986 Immigration Reform and Control Act. But what if someone shows up with a Social Security card and a driver’s license that belongs to someone else? The I-9 is useless in this case, because “it doesn’t root out identity fraud,” says Nachman. “Right idea, wrong execution.”

When there is a mismatch between employees’ names and their Social Security numbers, the administration sends the employer a list of mismatches, and the employer gets a certain amount of time to resolve the discrepancy.

An employee’s receipt of a mismatch letter listing a large number of employees might bring on a work-site raid, especially if it happens in combination with a disgruntled employee making report or complaints from the public, what Nachman calls “a totality of circumstances that could lead to an audit.”

Employers can protect themselves to some degree from “enduring an action from the government,” says Nachman, through a recent regulation that provides a specific process to get “safe harbor.” This protection requires an employer to submit to an audit by the government and enroll voluntarily in the “basic pilot program” implemented in 1996.

Through it employers submit information to the government about people whom they plan to hire, and the government provides a list of Social Security numbers. “The purpose is to give employers the ability to know that their employees are who they say they are — a way to check immediately the identities of their employees,” says Nachman.

Even the basic pilot program as it exists now doesn’t work well, says Nachman. The goal of the program is to accelerate mismatch information so that employers can avoid hiring people with incorrect Social Security numbers in the first place. But only 1,000 employers across the United States have taken part in the program.

“Most employers don’t want to go into something until they know it is a good process,” says Nachman. “Why create an administrative nightmare for yourself if you don’t have to do it.”

— Michele Alperin

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