Business law in the 21st century
We're at the dawn of a shiny new century. Change is in the air. Out with the old and in with the new is having an impact--and business law is no exception. Here's a peek at what lies ahead.
Business law will become more uniform nationwide In the past, most business law has been based on state rather than federal law. Sales law, for example, has been based on state statutes. Variations from state to state can be a problem. In the 21st century, as more small and mid-sized businesses go online, physical location will become less significant. Even small companies will be marketing goods and services nationally. Complying with multiple state laws can become one big headache.
But to keep the world of e-commerce flowing smoothly, lawmakers will strive for national standards. This will happen in one of two ways. First, Congress will legislate in some areas that historically have been left to the states. Second, states themselves will cooperate more intensively to pass laws that more closely resemble those in other states.
Judges will take a back seat to arbitrators and mediators The court system has gotten too slow and expensive for resolving business disputes. Your lawsuit can grind on for months-even years-as lawyers fiddle around with depositions and pre-trial motions. Then, on the eve of trial, your case may get bumped by a criminal or domestic relations dispute. And even if your case does go to trial, you face further delay and expense if the case has to wend its way through appeals. Not a good situation.
Wouldn't you prefer a quick, fair and cheap way to resolve disputes so you can get on with your business? Fortunately, lawyers and clients alike are discovering the virtues of "alternative dispute resolution." In the 21st century, more and more disputes will be settled through arbitration and mediation. We'll see a dramatic increase in the number of trained arbitrators and mediators.
And judges will find ways to put business disputes on a fast track to resolution. It's likely we'll have special business courts run by judges who specialize in business cases. A modest step perhaps. But just having judges who understand the language and practices of the business world will go a long way toward making courts congenial to business disputes.
The LLC will replace the corporation For nearly two centuries, the corporation has been the preferred legal format for most small and mid-sized businesses. Now, a new format-the limited liability company (LLC)-has taken root. In every state, you can form one of these streamlined, state-of-the-art entities.
In the 21st Century, nearly all business lawyers will agree that LLCs are the way to go. Like corporations, LLCs limit the personal liability of the owners. But they're much more flexible than corporations. For example, you don't need several tiers of management, such as shareholders, directors and officers. There's usually much less paperwork involved in setting up and maintaining an LLC. And even the IRS is cooperating by giving LLCs a choice of how they want to be taxed.
The move toward LLCs was one of the most impressive business trends of the 20th century. In the 21st century, we'll see few corporations formed. Two hundred years of legal history will be swept away almost in a flash.
Movement toward greater rights for workers will slow down During the last two decades of the 20th century, the old doctrine of at-will employment was sorely tested. Traditionally, unless workers had written contracts, employers could fire them for any reason or no reason at all. And workers were free to leave at any time.
But legal changes have required that employers need to think twice-and maybe three or four times-before firing someone. An employer who made a mistake could wind up in court and possibly have to pay the ex-employee tens of thousands of dollars in damages. Cases involving violation of anti-discrimination laws were just the tip of the iceberg. The more startling cases often involved implied contracts. A judge would rule that an employee acquired rights because of something the employer promised during a job interview or published in an employee handbook.
Other cases made employers cautious about saying anything adverse--even anything at all--about a former employee for fear of being hit with a defamation case.
Clearly, the balance has swung in the direction of increased worker rights. But watch for the pendulum to start moving the other way as courts and legislators strive for a reasonable balance between the interests of employers and employees.
Congress will ease the rules on hiring independent contractors Small businesses have often wanted to hire independent contractors rather than employees for certain assignments. These arrangements have benefited both the businesses and the independent contractors. But this has been a hazardous legal area. Complicated rules have made it tough to tell if a worker is an employee or an independent contractor. Does it matter? You bet. Say a business misclassifies a worker. For example, the business treats the worker as a contractor, but the IRS says the worker is really an employee. The business can get hit with taxes and penalties.
Congress has been trying to simplify rules. No success yet; but new, simple rules should be on the books in the early years of the 21st century.
And Congress is likely to tackle another knotty issue: allowing employers to give workers compensatory time off instead of paying them for overtime work. Again, Congress has flirted with the issue in recent years but taken no action. Watch for definitive action on the issue soon.
More legal self-help is in store Legal fees have been rising. But there's been a counter-trend: more businesses doing more legal chores themselves. Count on this trend continuing. Authoritative legal information will be available in a growing number of books and computer disks, as well as on numerous Web sites. You'll be able to prepare many contracts and other documents--at least the first draft--by tapping into the resources.
They payoff: fewer bills from lawyers. Obviously, lawyers won't disappear. But you'll learn to use them as coaches or collaborators. And, of course, you'll still need a lawyer's expertise for lawsuits and major business disputes. But the mystique surrounding law will fade away. You'll take more responsibility for legal matters.
Fred S. Steingold practices law in Ann Arbor, Mich. He is the author of The Legal Guide for Starting and Running a Small Business and The Employer's Legal Handbook, published by Nolo Press.
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