Suit by Group Medical Plan Was Time Barred Employment Contract Dispute

In the case of Blood Systems, Inc. v. Roesler, a federal district court in Arizona determined that a lawsuit filed under an employer’s group medical insurance plan against an employee was subject to Arizona’s one-year statute of limitations for claims involving “employment contract” disputes, instead of the state’s six-year statute of limitations for written contracts. The group plan’s suit sought reimbursement against an employee – a participant under the plan – for medical care benefits previously paid on her behalf after the employee recovered a settlement against a third party in a personal injury suit.

Background and procedural history

In 2009, the employee was seriously injured in a motorcycle accident. At the time of the accident, the employee and her husband were covered under a group medical insurance plan provided by the employer. The plan provider paid approximately $50,000 for the employee’s medical care.

The employee and her husband retained legal counsel to represent them on a personal injury claim against the other driver involved in the motorcycle crash. In 2009, the claim was settled against the other driver for $100,000. The employee and her spouse ultimately recovered $66,573.17 as their share of the settlement, after deducting attorney’s fees and other costs.

In 2011, the employer and the medical insurance plan provider filed a lawsuit against the employee and her husband and the law firm that had represented them in the personal injury case, seeking recovery of the sums the medical insurance plan paid for the employee’s medical care. A subrogation clause in the group medical plan gave the plan provider a right to reimbursement for the medical benefits it had paid for a plan participant’s care out of the proceeds of a judgment or settlement recovered by the participant in a personal injury claim against a responsible third party.

The court ruled in favor of the law firm, without a jury, deciding that a claim for subrogation and reimbursement would need to be asserted against the employee and her husband, not against their attorneys. The employee and her spouse asserted various legal defenses to the suit, including a claim that the suit was not timely filed under the statute of limitations.

The district court’s decision

The district court agreed that the suit was barred by the statute of limitations. The group insurance plan was an “employee welfare benefit plan” covered under ERISA, the Employee Retirement Income Security Act of 1974. This federal law did not specify a particular statute of limitations, so federal courts apply the most similar state statute of limitations.

The court determined that Arizona’s one-year limitations period for claims relating to “employment contract” disputes applied in this case, rather than a general six-year limitations period for written contracts. Under the group insurance plan, the employer agreed to provide additional compensation in the form of medical insurance benefits in exchange for the employee’s continued employment, the court said.

Contact an attorney

The drafting and review of business contracts, such as agreements relating to noncompetition, non-solicitation or non-disclosure of confidential information by officers or employees, compensation, severance packages, and other employment matters, contracts involving independent contractors or consultants, or for the purchase and sale of business assets, and operating agreements pertaining to shareholders, partnerships and limited liability companies, typically present complex legal matters. Private individuals and owners or operators of businesses should seek the advice and assistance of an attorney who is knowledgeable and experienced in this field.

Finding a Cost Efficient Way to Deal With Business Disputes

Business disputes can require a considerable amount of resources to be devoted to their resolution. Business owners need to be careful when working on these issues.

Many Arizona businesses have several different people involved in the ownership group. Some have multiple individuals playing an active role in day-to-day operations, and this can sometimes lead to problems when concerns develop over a particular course of action. These issues could result in significant disputes between the members of the ownership group.

There are many reasons why a dispute can arise between the co-owners of a closely held corporation, a limited liability company or a partnership. Perhaps one individual made a decision that threatened the potential profitability of the entity. One owner might be thinking of leaving the business, and considering selling his or her ownership interest, leading to disagreements over departure and potential new investors.

Prudent business owners realize the impact that these problems can have, and create strong written operating plans at the time of formation, i.e., shareholder agreements for corporations, operating agreements for limited liability companies and partnership agreements for partnerships. This gives everyone clear guidance regarding the management of the business and what happens when disagreements, death, disability or desire to end the business occur. However, if the businesses have no such agreements in place, future disputes could lead to extensive and expensive litigation.

For example, owners may allege that one of them engaged in bad faith conduct that constitutes a breach of fiduciary duty, claiming that the person acted in a way that put his or her interests ahead of those of the company causing economic harm to the company.

The courts or eventually a jury may need to decide the dispute. These disputes can be very complex, and take years to bring to a close. Such litigation may cause the owners and the business significant expenses to litigate.

The sooner these matters are addressed, the more likely the company can continue to flourish. Even if the business has not prepared a governing agreement between the owners, the business owners can always take action to protect themselves in the future by having an agreement between them drafted and signed.

Whether you have a governing agreement between the owners or not, if you have issues connected to a dispute among co-owners, it is important that you speak to an experienced business law attorney as soon as possible. You need to take immediate action to protect yourself, and the interests that you have in the business. Failing to take steps to protect your interest could have serious impact on your investment and future income from the business.

Keywords: business law, business disputes, business formation

Important Provisions for Arizona Employment Agreements

Arizona’s governor vetoed an important employment law bill last month. Despite high levels of public support for anti-discrimination laws against gays and lesbians, state law still does not protect residents from discrimination based on sexual orientation. The veto means that employers in Arizona can discriminate against a potential or current employee based on his or her sexual orientation.

Employment laws can change frequently, highlighting the importance of staying on top of potential changes. Instances of employment law litigation can easily arise regarding a number of employee versus employer issues such as:

  • Wrongful termination
  • Unpaid or underpaid wages and overtime
  • Vague or illegal employment contract clauses
  • Retaliation and discrimination

While some employment issues may seem obvious, many details may be missed, stressing the need for legal advice. Before drafting or signing an employment agreement, consider the following important contract provisions:

  • Independent contractor versus employee: First, it is important to understand the differences between an employee and an independent contractor and establish which the newly hired person will be. Issues of taxes, benefits and employee oversight must be considered as there are legal ramifications for both types of statuses.
  • Cover the basics: Be sure to outline the basics of the position such as expectations for wages, overtime pay, working hours, training and entitlement to benefits. Outline issues of vacation approval, probationary periods and flexible workdays with clear guidelines and easily understood procedures.
  • Protect your assets: Employers frequently protect their business assets through non-compete and nondisclosure clauses in order to keep trade secrets and internally developed products from their competitors. Employees should have a firm understanding of the restrictions placed on them. For example, intellectual property developed on their own time may actually belong to the companies for which they work.
  • Termination provisions: In Arizona, unless specifically defined in a written employment agreement, the term of employment may end at the will of either party. If you do have a specified period of employment, details regarding severance pay and other responsibilities should be included in the contract. Such terms may include the return of company property from an employee’s home office, entitlement to unused vacation accruals, use of employee-developed products or systems and restraints on the employee competing in the same or similar business.

These are only a few important employment law issues that should be addressed in agreements between employees or independent contractors and their employers.

Consult a lawyer

No matter which side of the table you are on, it is important to consult an experienced employment law attorney before drafting an agreement. A lawyer knowledgeable about all types of contracts and issues of employment law can help tailor a contract to fit your needs.

Make Sure Yours are Legally Binding

As any business owner knows, relationships and agreements with customers, vendors, suppliers and other business associates are vitally important to the success of your business. Almost every business transaction requires a contract of some sort whether it is oral or written. As such, it is vitally important that each businessperson understands the essentials of a legally binding contract.

Creating binding contracts

In order to create a legally enforceable agreement, all parties to the contract must be competent, i.e. cognizant of what he or she is doing. Additionally, the contract must be created by mutual consent; all parties must realize they are creating an agreement and have a meeting of minds about the subject of the contract.

A contract cannot require someone to perform an illegal act and must comply with the laws of the state in which the agreement was created. Often, businesses and corporations from different states form agreements and, in those situations, the contracts should contain clauses indicating which state’s laws apply.

Commit all terms to writing and do not rely on oral or written promises or representations that are made outside of the contract; if a dispute should later arise, only the particulars of the written contract will be enforceable. Some types of contracts are required to be in writing, such as real estate transactions and contracts that will take more than a year to perform.

When a dispute arises

Unfortunately, even the best-negotiated contracts do not always prevent disputes. When faced with the possibility of contract litigation, do the following:

  • Reread your contract carefully. Does it state what you intended – and recollect – from the start?
  • Review the particulars of the termination clause. How can you legally end the contract?
  • Double-check key dates. Was a deadline missed or do some dates trigger differing events?
  • Verify compliance with contract terms by both yourself and the other parties. Was there a breach?
  • Consider all various options. Do you really have to end the contract or is there another, better way to get what you want?
  • Calculate the cost of terminating the contract. Is it worth it to serve a notice of breach or would it be better to renegotiate the terms of your deal?

Occasionally, it is better to walk away from a deal-gone-bad than to fight it. However, even coming to that decision may require professional assistance.

A lawyer can help

If you are in the process of creating, renegotiating, terminating or merely deciding what you want to do about a business agreement, consult an experienced contract attorney. A lawyer knowledgeable about all stages and types of contracts can help.

The Statute of Frauds in Arizona: Enforcing a Business Contract

Any businessperson is aware that when other resolution options are exhausted, a party to a valid contract can typically turn to the courts for enforcement or for a breach of contract. Even oral contracts are enforceable, albeit with a few caveats.

Under Arizona’s Statute of Frauds, to be enforceable by a court, certain types of contracts must meet a set of specific criteria. By learning more about the Statute of Frauds, you can ensure that you get the benefit you are seeking in a contract.

Statute of Frauds requires writing and signature

There are two prerequisites for bringing a court action for an agreement that falls under the Statute of Frauds. First, there must be some written memorandum of the agreement. Note that this requirement does not mean that the entire contract has to be in writing; rather, that there is some written record evidencing the transaction that must, in some cases, contain certain essential elements of the agreement. What constitutes such a writing is generally construed broadly, and even electronic records like emails may satisfy the requirement.

The second prerequisite is that the writing must be signed by the party against whom enforcement is sought, or by someone who is lawfully authorized by that party to sign on their behalf. Again, the signature requirement is construed broadly; for example, an email signature or a name typed at the bottom of an email may fulfill the requirement.

Agreements to which the Statute of Fraud applies

Some of the less common contracts to which the Statute of Frauds may apply include:

  • Agreements by an executor or administrator of an estate to pay debts or damages owed by the testator out of his or her own assets
  • A promise made by any person to pay for the debt or default of someone else
  • Any agreement that includes as consideration the promise to marry, excluding marriage agreements made with consideration consisting entirely of an exchange of mutual promises to marry
  • Agreements making an arrangement by which an employee or agent is to buy or sell, for a commission, real property for a commission
    More common types of contracts that may fall under the Statute of Frauds include:
  • Contracts to sell goods valued in excess of five hundred dollars (unless the buyer accepts some of the goods, either actually receiving them or giving a part payment)
  • Agreements to sell real property, or a lease agreement for a longer period of time than one year
  • Contracts that are not to be, or cannot be, performed within a year from the time they were entered into
  • Provisions made by will, or any agreement that by its own terms will not be transacted until after the death of the promisor
  • Promises to make a loan or extend credit that involve more than a quarter of a million dollars and that are not made for family, household or personal ends.

Contact an Arizona contracts attorney for help

The Statute of Frauds helps ensure that there is adequate evidence of certain types of contracts that may otherwise be next to impossible to enforce. But, while its aims are laudable, it can also lead to complex situations, and sometimes unjust circumstances. In the latter case, even if the contract is not enforceable, quasi-contract remedies for unjust enrichment may be available. If you need help navigating the Statute of Frauds, or if you are seeking enforcement of a contract or a remedy for breach of contract, the help of an Arizona contracts attorney is essential.

Do Employment Contracts Put Arizona Employees at a Disadvantage?

Some Arizona companies require their employees to sign a contract prior to or even after becoming employed. Often a person will sign an employment contract without reading it or having it reviewed by legal counsel, but this can put them at a distinct disadvantage if they leave the company or become dissatisfied with their employer’s treatment. To protect yourself from an employment contract that may not in your best interest, it is important to understand what a contract is, the elements that are generally found in it and what you should be aware of before signing it.

If you are considering signing an employment contract or need one reviewed because of a potential breach, contact an experienced employment attorney.

What is an employment contract?

An employment contract is a written agreement between you and your employer that contains legal language, directives and definitions tailored to the position you will fill and the industry you work in. For example, an employment contract between a doctor and a hospital is going to be different from a contract between an executive and a finance company.

Employment contracts are typically used for high paying jobs like attorneys, doctors, scientists, executive and managers as well as for many sales positions. Companies use them to protect themselves if a problem arises and to give them the ability to hold the employee accountable for a breach that may threaten their business.

Elements of an employment contract

The elements of an employment contract may include:

  • Salary and benefits
  • Severance provisions
  • Non-compete agreement
  • Performance
  • Non-disclosure
  • Non-solicitation
  • Length of employment
  • Definition of the position and responsibilities

It is important to carefully review the details of each element in the contract. For example, the portion on salary and benefits should have clear language regarding bonuses, raises, vacation time, sick leave, holidays, insurance and stock options.

Terms to watch out for

It is especially important to understand the actions the employer may take when terms of the employment agreement are broken by the employee. For example, if the employment contract contains a non-disclosure agreement, you may not divulge the employer’s proprietary information while working for the employer or afterward. Doing so may subject you to liability for legal damages. A non-compete agreement may limit your ability to work within a specific geographic area if you leave the company or prohibit you from doing the type of work your are trained and experienced in for a limited time.

Employment contracts may offer good terms to an employee, but it is essential to understand how what you agree to may affect your future if something changes or things don’t work out. A review by an employment lawyer is your best protection.

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