In a couple of weeks California’s “hands free” cell phone law becomes effective.  On July 1, 2008 police officers will begin to issue tickets to drivers who use cell phones that are not operated “hands free.” For businesses, and especially companies employing young people, putting a policy in place that requires employees to follow the new law is important, and now urgent.   

The Law. Sections 23123 and 23124 of the California Vehicle Code prohibit drivers from using a wireless telephone while operating a motor vehicle unless the driver uses a telephone that is designed and configured to be “hands free.”  Drivers who violate the law will face a $20 fine for the first violation and a $50 fine for each time thereafter. There are some exceptions to the law that include drivers using their cell phone in an emergency, in some types of commercial trucks or farm vehicles, and drivers of emergency service vehicles  The law also forbids young people under age 18 from using any mobile device (including a pager or texting phone) while driving.  California joins a handful of Eastern States in adopting a “hands free” cell phone law. These new laws respond to the growing use of cell phones by drivers and accidents involving drivers distracted when using a cell phone.  

The Risk To Employers. If an employee violates a safety law when involved in an accident on the job, they and their employer may be held negligent, even if they are otherwise driving well. This principle is referred to as negligence per se. Lawyers use the principle of negligence per se as a shortcut to establish liability in law suits to win damages for people injured in accidents. The cell phone law is a safety law specifically designed to eliminate distractions and prevent accidents. Depending on the extent of the injuries, this financial risk to an employer could be very substantial. If the cited employee driver has violated the cell phone law before, significant punitive damages may also apply. After July 1 of this year, we are probably going to see negligence per se used more frequently in personal injury cases when a driver was using a cell phone.     

What Employers Can Do. Adopt a policy and/or amend your employee handbook to require strict compliance with the new “hands free” cell phone law by all employees. Many businesses may instruct their employees not to use cell phones while driving and to let incoming calls go to voicemail to be returned outside of the car in a safe area. If your business issues cell phones to its employees, or necessarily requires the use of a cell phone by its employees, make sure that the cell phones can be used “hands free.” Note that a cell phone that has a speaker phone function will not necessarily comply with the law.  Employers who hire employees under age 18 should prohibit their use of a cell phone in a car. The policy should be acknowledged by employees in writing and enforced by the company.   A more detailed article that discusses the impact of this new law on individuals and  businesses may be found on ezinearticles.com, entitled California’s New Cell Phone Law - What Drivers and Employers Need To Know.  

When helpful new technology emerges, it frequently has baggage. California is dealing with the realization that the convenience and increased ability to do business “in route” and stay connected socially, has the baggage of creating a distracted driver and perhaps has made our highways not as safe as before.  This is a predictable response, but with baggage for business as well. Promptly and strategically responding to this new business risk can make your business not only less exposed to liability, but can demonstrate the good citizen that businesses can be in society.    

A strong brand contributes greatly to a company’s success. Generic company names invite confusion in the marketplace and can mask their identity. Strong company names not only identify their products or services, but are marketing tools, vision reminders and communicate the personality of the company.  Branding is about being distinctive. It is an effective way to differentiate your product or service from all others and be recognized easily in your market. Strong branding names usually contain one of three types of words: 

•   Invented Words. These are not existing words, but embryonic words designed to become the description of your product or service. You distinguish your company the most if you use an invented word in your company name. Xerox^® and Kleenex^® are classic examples of company names that were invented words.
• Unrelated Words.  These are actual words – nouns, verbs, adjectives. However, when a company’s name is a word whose natural meaning is unrelated to the product or service of the business, it can be a powerful brand. Apple^®, Dove^®, Google^® and Yahoo^® are company names using actual words whose meaning is unrelated to the company’s product or service. Perhaps this type of name is memorable in the same way that a joke is memorable. Surprise is at the core of an effective joke. To call a computer an apple or a chocolate bar a bird, or an Internet search engine a number or a vocal exclamation creates a memorable surprise – a strong brand.
• Proper Nouns. This category may remind some of junior high school grammar lessons, but no sentence outlining is required to get this concept. Certain products and services have reputations that are built around established family or personal names. Disney^®, Ford^® and Hershey^® are all company names that contain the name of their founders. Their reputation and product identification is personal. How enduring a brand will be when the individual is no longer around is dependent on the success of the team associated with the individual. Dynasty and heritage bring strength to these kinds of company names.    

 In today’s economy, entrepreneurs with business acumen choose company names capable of being strong brands.  Laura Lake, a marketing columnist for About.com, outlines an intelligent way to develop an effective company name in her article, Learn How To Develop A “Winning” Business Name. A reputable marketing firm can also guide you in choosing a company name that will be a strong brand.   Start strong. Choose the name of your new company deliberately. Choose a strong brand for your company.

 Legal/technology services firm partner Robert J. Scott said today, “There are two types of companies: those that have been audited [for software violations] and those that will be.” Scott sees the trend. In the last year, the Business Software Alliance, the main copyright enforcement watchdog for Microsoft Corp, Adobe systems and Symantec, reaped $13 million in software violation settlements, almost 90% of which came from small businesses.   

Here are five things a small business owner can do to reduce the risk of being hit with a software violation claim:

Now is a popular time for small business entrepreneurs to cast vision and set objectives into the new year.  For a long time, managers have been using the goal setting formula known as SMART (Smart, Measureable, Achievable, Realistic, Timely) to set their annual goals. Ray Silverstein is a sales columnist for Entrepreneur.com.  In his article, A Guide to Goal Setting, Silverstein explains what SMART goal setting is and how it works.  

Also this month, blogger Mark Horstman has posted a 3-part podcast entitled How to Set Annual Goals.  Horstman hosts the blog, Manager Tools. In an innovative and fresh look at SMART goal setting, Horstman claims that the seasoned formula is “intellectually flawed” and generally not applied properly in the workplace. Mark Horstman suggests an alternate method, which he predictably calls MT goal setting. 

For small business entrepreneurs, the important thing about annual vision casting and annual goal setting is to do it. It is valuable time spent if the business’ vision and goals are used as “filters” for the choices that are made throughout the new year. 

Whatever method used, having a clear vision of the purpose of the company is essential for both setting meaningful goals and maintaining the momentum of success throughout the year. When Starbucks Chairman Howard Schultz recently reassumed the CEO position of Starbucks, a “back to basics” statement was released by the new Chairman Craig Weatherup. He said that Schultz’ purpose was “ . . .  to relentlessly focus the entire organization on the customer.” Meeting the needs of the customer is the fundamental purpose of every business.

As restated by Starbucks’ management, the fundamental purpose of a business is a good beginning point for vision casting and goal setting. Asking how the business’ product or service meets the need of the customer brings focus to the process. 

Have a very successful business year in 2008 – just as you planned.

Headlines in the The Wall Street Journal  describe the shriveling of US and global economies almost every day. Heralding persistent economic decline could discourage small business owners.               

The November 2007 survey of Discovery Small Business Watch  concluded that  “Economic confidence among small business owners declined for the fourth straight month in November, as increased pessimism over the U.S. economy dragged down indicators of relative stability.”   

However, the Discovery survey also said that small business owners were experiencing less cash flow issues over the last three months. When I remember that Peter Drucker considered cash flow more important than profit, better small business cash flow is a huge encouragement.   

So why does the Discovery Small Business Watch survey show a decline in entrepreneurial confidence when small business owners are improving their cash flow situation?

Small business owner Tim Wilburne, of Virginia-based TW Controls debunks Discovery’s survey, saying: “So they found 1000 small businesses with 5 or fewer employees that had time to take a survey? Some weeks I can hardly find the time to even talk to people I know, much less take a survey. It sounds to me like these businesses aren’t putting forth the effort to be successful.” Tim noticed no data about small business owners who refused to spend their time taking the survey.

I like Tim’s attitude. I bet Peter Drucker would too. Professor Drucker explained that “the entrepreneur always searches for change, responds to it, and exploits it as an opportunity.”     

Even in the face of the “doom and gloom” reports and surveys, small business owners show themselves to be entrepreneurs when they respond to change and exploit it as an opportunity. 

What opportunities can you exploit from the economic changes that are happening in your markets? 

As I was driving to meet a friend for dinner last Thursday, I heard on the radio that Congress had passed the Mortgage Cancellation Relief Act.  Sure, it is probably odd to get excited about something like that after hours.  But it caught my attention because it is one of those events that will actually change an oppressive policy.  

The tax law currently requires homeowners to pay income tax on amounts forgiven by their mortgage lender or when their home sells in foreclosure for less than their debt.  Being taxed on the amount a person is unable to pay truly adds insult to injury. This tax policy has been in the cross-hairs of criticism for some time. I read that the National Board of Realtors®  has been lobbying for a change in the law since the early 1990’s. With the current national mortgage crisis and many stagnant real estate markets, more homeowners would likely be affected by this unfair tax now than ever.

If passed by the Senate and signed by the President as expected, the new law will exclude from gross income of individual taxpayers discharges of indebtedness attributable to certain forgiven residential mortgage obligations. In short, it will repeal the “phantom income tax” for homeowners on their primary residences.

Congress clearly wants to respond to how the mortgage industry meltdown is affecting the public. This is a very practical way to ease one way government has been overbearing. When this law becomes effective, at least the tax law will no longer hit homeowners when they are already down. 

Many people are nearing the 3, 5 or 7 year mark of an interest only mortgage. They are finding it is difficult or impossible to sell their home at this time for enough money to cover selling costs and the mortgages of the home. I hear about more people considering a “short sale.” A “short sale” is when the home is sold for less than the total of the mortgages on the home because the lender(s) agree to take less than the total that is owed them. 

Be careful. There are consequences to doing a “short sale.” While a person can avoid having a foreclosure, a “short sale” can be reported as an unsatisfied debt, which is not a good thing. The values of the neighborhood could be affected by a lower purchase price by the buyers in a “short sale.” Your real estate professional will probably be “squeezed” to give up some of his or her commission to make the deal work –risking giving you less attention than other transactions. The amount of your debt that is forgiven by your lender could be treated as ordinary income to you – meaning that you could be taxed on money that you do not actually receive. 

A seasoned real estate professional or experienced real estate attorney should be able to discuss some options for you, including (1) just selling the property with aggressive marketing; (2) doing a sale at full price, but having the buyer take the property “subject to” the existing loan (probably at a lower interest rate than could be obtained otherwise); (3) doing a sale with an Note secured by an All Inclusive Deed of Trust (sometimes referred to as an AITD or a “wraparound” loan); or (4) doing a lease option instead of a purchase transaction.

There are risks and benefits to each of these options. You should consult an attorney to explain each to you before structuring a transaction in any of these ways.

As usual, there are usually alternative ways to tackle most obstacles in life.   Doing a “short sale” is only one of the ways to deal with an approaching balloon payment or change in monthly loan payment. 

Hi.  I’m Ralph Martinez of the Martinez Law Group.  I want this space to be a place where I and other members of the firm share information and ideas that made us think of you, the entrepreneur.  We want you to have the ideas we have found to be practical, innovative, insightful, inspiring or just intriguing.  We´ll be sharing our favorite books, articles that have caught our attention, links to other resources, and general musings on life and business.

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