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Considerations When Buying an In-Home Health Care Company

Home health care is one of the fastest growing industries in California. The Centers for Disease Control and Prevention (CDC) estimates that there are nearly 12,000 home health agencies nationwide. If you are considering purchasing a home health agency, it is crucial that you know how to protect your legal rights and financial interests. Here, our Fremont lawyer for buying a business highlights key considerations to know when buying an in-home health care company in California

Important Issues to Review When Buying an In-Home Health Care Agency in California

Health care is a large, highly regulated industry. There are many unique considerations that you need to be aware of if you are purchasing a home health care business. Here are some key things to keep in mind when assessing an in-home health care company in California:

Accreditation: Review the agency’s current accreditation status and verify whether it’s up to date. Accreditation is essential for reimbursement from Medicare and Medicaid, and it’s a key factor in the agency’s overall credibility. The most common accreditation organizations for home health agencies are The Joint Commission, CHAP, and ACHC.
Employees: In-home health care companies are only as strong as their human capital. Staff matters. Evaluate the current employees and their qualifications. Verify that all staff members are licensed and certified, and, if applicable, review any employment contracts.
Medicare eligibility: Under federal law (42 CFR § 424.550), a home health care agency that has enrolled in Medicare within the last 36 months generally cannot be transferred/sold. If it is sold, the company may be barred from Medicare. This could effectively destroy the business, but there are some exceptions to the federal rule. A business lawyer can help you evaluate any specific situation.
Franchise relationship: Many home health care companies in California are franchise businesses. If you are considering purchasing a home health company and becoming a franchisee, you need to understand the benefits and drawbacks that come from the franchise relationship. The franchise agreement should be reviewed by a lawyer.
Buy-Sale Agreements: A well drafted agreement to purchase or sell the business is critical, to minimize the risks of liability. It should be drafted or reviewed by an attorney.

Of course, all the other issues that you would need to consider when buying a business still apply. For example, it is imperative that you take a careful look at a home health care company’s balances—all assets and all liabilities—before finalizing any purchase agreement.

Comprehensive Due Diligence is a Must When Buying a Bay Area Business

When buying a business in the Bay Area, it is imperative that you conduct thorough due diligence to avoid potential pitfalls. Among other things, due diligence should include a review of legal, financial, and operational aspects of the business. An in-home health agency is no exception to the rule. As this is a complex industry, comprehensive due diligence is especially important. You do not have to figure everything out alone. Buyers should be prepared to work with an experienced business lawyer.

Get Help from a California Business Lawyer for In-Home Health Care Companies

Lynnette Ariathurai is a top business lawyer with deep experience working with home health companies. If you have questions about buying an in-home health business in California, we can help. Contact us now for a confidential consultation. Our firm works with home health companies in Fremont, Newark, Hayward, East Bay, Milpitas, Union City, San Leandro, San Jose, Santa Clara, and throughout the region.

health care company, home health care, home health care agency, in-home health care agency

CA Assembly Bill 890 – What it Means to Nurses and Questions that Remain

Nursing is one of the most important occupations in our region. According to data from the California Board of Registered Nursing, there are nearly 500,000 actively registered nurses (RNs) in the state. In September of 2020, Governor Gavin Newsom signed a law—California Assembly Bill 890—which has important implications for Nurse Practitioners and their employers. Here, our Bay Area business attorney for nurses explains the key things that you need to know about AB 890.

An Overview of California Assembly Bill 890 (AB 890)

AB 890 is a California state law that is designed to grant Nurse Practitioners additional autonomy to provide services to patients. The law creates two new categories of nursing professionals:

103 NP (Cal. Bus. & Prof. Code § 2837.103): A Nurse Practitioner who can work in a group setting with at least one physician present.
104 NP (Cal. Bus. & Prof. Code § 2837.104): A Nurse Practitioner who can work independently in certain circumstances.

In other words, Bill AB 890 gives Nurse Practitioners in California who meet pre-established professional requirements more authority to practice independently.

Bill AB 890 Imposes Peer Review Reporting Requirements on Many Nurses

Beyond granting additional autonomy to qualified Nurse Practitioners, AB 890 includes a provision that requires these professionals to adhere to the peer review reporting requirements outlined in Section 805 of California law. The bill amends the definition of the statutory term “licentiate” to include nurses. In effect, this means that some mandatory reporting requirements are triggered when a nurse faces professional disciplinary action.

Many Nurses Have Questions About AB 890—Our Legal Team Can Help

If you are a nurse who has questions about the implications of CA Assembly Bill 890, you are certainly not alone. It is a complex piece of legislation. Despite being signed into law more than two years ago, many questions surrounding its interpretation remain, because AB 890 only took full effect on January 1st, 2023. Our law firm provides legal guidance to nurses. Some common questions that you may have include:

What types of training are required for Nurse Practitioners to gain additional autonomy to practice independently under AB 890?
What additional types of practice are available to Nurse Practitioners since AB 890 has taken effect?
How can Nurse Practitioners who have opened their own practice take advantage of new opportunities to provide care while ensuring full AB 890 compliance?
What are some business strategies that NP 104 entrepreneurs can implement to develop and grow their professional practice in the new regulatory environment?
How can Nurse Practitioners in California effectively start the business?

Contact Our California Business Lawyer for Nurses Attorney Today

Lynnette Ariathurai is an experienced business law attorney for nurses, doctors, and other medical professionals. If you have any specific questions or concerns about CA Assembly Bill 890, please do not hesitate to contact us. We provide legal services throughout the Bay Area.

California nursing categories, Nursing practitioners, registered nurses

Forming a Professional Nursing Corporation in CA

Nursing is one of the most important occupations and the workplace environment is changing rapidly. According to data from the California Board of Registered Nursing, there are more than 487,000 active registered nurses (RNs) in the state. If you are considering starting a nursing company in California, it is crucial that your business has the right legal structure. A nursing corporation is a specialized type of business entity designed for firms offering services within the nursing profession. Here, our Fremont business formation lawyer highlights the key things to know about professional nursing corporations in California.

Know the Law: Professional Nursing Corporations in California

In California, a professional corporation (PC) is a specialized type of legal entity through which certain licensed professionals can conduct their business operations. Under California law (Cal. Corporation Code § 13401(b)), PCs are required to register with the state agency that is responsible for regulating the specific profession in question. A professional nursing corporation is required to register with the Board of Registered Nursing. Notably, not just anyone can form a professional nursing corporation in California. There are strict ownership requirements. At least 51 percent of the corporation must be owned by registered nurses in California. The remaining 49 percent can be owned by other specific licensed professionals in the health care field.

What are the Benefits of Forming a Nursing Corporation?

A PC is generally the most efficient and effective way to operate a nursing business in California. Some key advantages of operating a nursing services business as a professional nursing corporation include:

Tax savings—a professional corporation can reduce a nurse’s self-employment taxes
Liability protection—PCs are designed to provide additional legal liability protection

Important Considerations When Forming a Professional Nursing Corporation

Are you a registered nurse who is considering forming a business in California? It is imperative that your business is set up properly. Mistakes could cause you serious problems. Here are some of the most important considerations when setting up a professional nursing corporation in California.

Name: You need to select a name for your professional nursing practice. California law requires you to include the term “nursing” or “registered nursing” in the official name.
Tax implications: Taxes matter. In California, a professional nursing corporation can be taxed as a standard corporation (C Corporation), or it can be taxed as a pass-through business entity (S Corporation).
Ownership structure: The ownership structure of your professional nursing corporation must be set up properly. Make sure you have the right documents in place. You must file articles of incorporation with the state. You can also benefit from a comprehensive bylaws. There are several other documents needed to be a professional nursing corporation.

Forming a new business is complicated—especially when you are in a highly regulated industry such as health care. You do not have to have to navigate the business formation process alone. An experienced California business formation lawyer for nurses can help.

Call Our California Business Formation Attorney Today

Lynnette Ariathurai is a business formation lawyer with the skills, knowledge, and legal expertise to help you form a professional nursing corporation in CA. If you have any questions about your rights, responsibilities, or options, please do not hesitate to contact us for a confidential consultation. From our offices in Fremont, near Newark, we serve clients in Hayward, East Bay, Milpitas, Union City, San Leandro, Gilroy, San Jose, Santa Clara, and throughout the entire Bay Area.

Can a Business Steal Your Employee?

Employers invest a tremendous amount of time, money, and other resources into recruiting and training their employees. A competitor targeting your qualified employees could cause harm to your business. This raises an important question: Can another business poach your employees? In California, the answer is “it depends”—poaching employees is generally lawful, but there are limits on what another employer can do. In this article, our Fremont business lawyer highlights the key things to know about another company’s ability to steal your employees in California.

Background: California is an At-Will Employment State

As a starting point, it is important to emphasize that California is an at-will employment jurisdiction. The National Conference of State Legislatures (NCSL) explains that at-will employment is a doctrine whereby either—employer or employee—has the right to end the relationship at any time and for any reason, except for an illegal reason. In other words, in the absence of an employment contract, an individual employee is free to leave your company.

Employee Non-Compete Agreements are Unenforceable in California

Some states allow employees to get their employees to sign non-compete agreements that, at least temporarily, prevent them from working for a direct competitor. Employee non-compete agreements are not enforceable in California. However, non-solicitation agreements may be upheld.

Businesses in California Have Rights and Options for Protecting their Interests

Simply put, California law protects an employee’s right to leave their employer for a competitor. It also protects the right of a business to try to recruit qualified employees—including those actively employed at competing businesses. Poaching of employees is generally lawful in California. However, there are some limitations that prevent competitors from “stealing” your employees. Here are some of the key things that employers in California should understand about their rights and options for keeping competing businesses from poaching their employees:

Employees Owe a Basic Duty of Loyalty: A worker who is actively employed at your company owes it a basic duty of loyalty. An employee could announce that they are leaving to join a competing company, but they generally cannot actively solicit their co-workers to join them while still in your employ.
Employment Agreements May Offer Protection: One strategy that businesses can use to protect their staff from poaching is an employment agreement. An employee who signs a valid and well-tailored employment agreement could face a breach of contract claim if they do not abide by the terms—such as if they leave for a competitor before the contract ends. Though, it is important to emphasize that non-compete clauses cannot be included in an employment agreement in California. However, the competitor may be liable for interfering with that employment contract.
California Law Prohibits “Workforce Raids”: While general “poaching” of employees is not barred in California, there are some restrictions on “raids.” In effect, the law prohibits competitors from using bad faith practices to intentionally solicit a large number of your employees to damage your business. If your employees are “raided” by a competitor, you could have a tortious interference claim under California law. Generally, an employment contract is required to successfully pursue this type of claim.

How Businesses Can Protect Confidential Information When Employees Leave

While businesses in California have limited options to prevent their employees from leaving to take a position at a competing company, employers do have options for protecting their confidential information. A properly drafted and well-tailored non-disclosure agreement that protects proprietary business information, including trade secrets, may be enforceable in California.

Contact Our Fremont, CA Business Law Attorney Today

Lynnette Ariathurai is an experienced, solutions-driven business lawyer. If you have any questions about another company stealing your employees, we are here to help. Contact us today for a strictly confidential consultation. We provide business law representation throughout the Bay Area.

business contracts, Business Formation & Planning, Contracts

Updated CA Family Care and Leave Act Impacts Small Businesses

The California Family Rights Act (CFRA) is our state’s counterpart to the federal Family and Medical Leave Act (FMLA). The CFRA provides more expansive protection to employees and, as of January 1st, 2021, the CFRA has been updated and expanded. More small businesses in the Bay Area now have obligations under the statute. In this article, our Fremont employment law attorney for employers provides an overview of the key things small businesses should know about the updated California family care and family leave laws.

Background: An Overview of the CFRA

The CFRA is our state’s primary family care and leave law for employees. Under the CFRA, eligible employees may take up to 12 weeks of job-protected unpaid leave to deal with a qualifying family or medical emergency. The California Department of Fair Housing and Employment emphasizes that the law provides leave for eligible workers to “care for their own serious health condition or a family member with a serious health condition, or to bond with a new child.”

Dramatic Expansion of CFRA—It Now Applies to Many Small Employers

Recent legislation has changed the scope of the family care and medical leave laws in California. Effective as of January 1st, 2021, many more small businesses are covered by the CFRA. Here are five key things that all small business owners in the Bay Area need to know about the law:

Five or more employees: The CFRA applies to all businesses and organizations with five or more total employees. Only employers with four or fewer workers are exempt from coverage.
Executives are employees: The CFRA clearly states that executives and officers are counted as employees.
No more 75 mile radius: The 75 mile radius requirement—which still counted for the federal FMLA—is no longer an element in the CFRA. It doesn’t matter where employees are located. As more and more workers began to work remotely, California removed the 75 mile radius requirement.
No exception for employers based outside of CA: The CFRA counts all employees—regardless of state. Further, there is no exception to the law for employers based outside of California. If you have an employee in California and you have five or more total workers nationwide, that California employee is covered by the CFRA.
“Family member” is broader: Finally, the term “family member” has been dramatically expanded to include more people. A worker may now be able to take unpaid, job-protected leave to care for an adult child, a sibling, or a grandparent.

Small Businesses Must Ensure that their Employee Handbook is Updated

All small businesses in California should review and, if necessary, revise their employee handbook and/or any other materials that they provide to staff. As the reformed CFRA applies to many more small businesses, it is possible that some companies or organizations are using outdated materials that improperly state that they are not covered by the CFRA. Small businesses can consult with an employment lawyer for employers to ensure that their handbook is fully compliant with the January 1st, 2021 revisions to the CFRA.

Get Help from an Employment Lawyer for Employers in California

Lynnette Ariathurai is an experienced employment attorney for employers. If you are a small business owner in Fremont CA, near Newark, or Hayward, East Bay, Milpitas, Union City, San Leandro, Gilroy, San Jose, or Santa Clara with questions about the updated California Family Rights Act (CFRA), we are here to help. Contact us today to set up a confidential initial appointment.

California employment laws, California Family Rights Act, CRFA, family care, family leave, medical leave

Regulatory Compliance for Medical Practices

Health care is a highly regulated industry. It is crucial that all medical practices are in full compliance with applicable federal and state regulations. Any violation could lead to significant problems—potentially even financial sanctions.

Lynnette Ariathurai is an experienced business lawyer for medical practitioners. Attorney Ariathurai helps all types of medical practice with regulatory issues. To set up a confidential consultation with an experienced business attorney, please contact our Fremont law office today.

An Overview of Federal and State Regulations for Medical Practices in California

Moscone-Knox Professional Corporation Act

California has specific rules and regulations in place regarding the formation and ownership of medical practices. Medical practices must be structured as professional corporations (PCs) under the Moscone-Knox Professional Corporation Act. If you have any specific questions about forming or structuring a medical practice in California, an experienced business attorney for doctors, nurses, and medical personnel can help.

Anti-Kickback Laws

There are federal and state laws in place prohibiting “kickbacks” for medical referrals. The federal Anti-Kickback Statute (AKS) and the California Anti-Kickback Statute largely prohibit the offer of anything of value in exchange for a referral for a patient who participates in a federal or state health program.

Stark Law

Also known as the physician self-referral law, the Stark Law is a federal statute that bars physicians from referring patients that receive service paid by Medicare, Medicaid, or another federal health program to an entity with which the physician or their family member has a financial relationship. There are some limited exceptions to the law.

Regulations against Billing Fraud

Both California and the federal government have strict rules and regulations in place for billing fraud. Notably, the Office of Inspector General (OIG) can bring civil charges for health billing fraud even if the conduct is deemed to be accidental. Medical practices need to understand billing regulations, including the California state prohibition on “surprise medical bills.”

Health Insurance Portability and Accountability Act (HIPAA)

The Health Insurance Portability and Accountability Act (HIPAA) requires medical practices to strictly protect the confidentiality of sensitive patient information. It is imperative that all medical practices operating in California have a well-developed system in place for protecting the privacy of patient records.

Sharing Office Space

It is not uncommon for medical practices—especially smaller medical practices—to share office space. Such an arrangement can be advantageous for all parties involved. Though, in doing so, medical practices must ensure that their conduct is consistent with their lease. A violation of the lease for improper share could lead to problems. Medical practices also need to ensure that patient records are protected as required by HIPAA. In 2019, the Centers for Medicare and Medicaid Services (CMS) released draft guidelines on medical practice share space arrangement. A key principle is that each medical practice should keep its business clearly separate and that proper disclosures should be made to patients.

Get Help from a California Business Lawyer for Medical Practices

Lynnette Ariathurai is a Bay Area business law attorney committed to providing forward-looking legal advice and cost-effective solutions for medical practices in Fremont CA, near Newark, or Hayward, East Bay, Milpitas, Union City, San Leandro, Gilroy, San Jose, or Santa Clara. If you have any questions about regulatory compliance for medical practices, please contact our Fremont office for a strictly confidential consultation.

health billing regulations, health care regulations, HIPAA, medical practice regulations, structuring a medical practice

Importance of Having an Attorney Advise During the Formation of an LLC

Making the decision to start up a new business is exciting. You can build something of real value to support yourself, your family, and your community. A limited liability company (LLC) is a flexible, cost effective legal structure for many different types of businesses. As forming any type of new business can be complicated, it is best to seek guidance from an experienced attorney who can help you put the right foundation in place. Here, our Fremont business formation lawyer highlights five considerations that should be addressed during the formation of a limited liability company (LLC).

1. Whether an LLC is the proper form (eligibility, needs, etc.)

A limited liability company is a popular way to set up a business. As explained by the California Secretary of State, an LLC “offers liability protection similar to that of a corporation, but is taxed differently.” It combines some of the core advantages of a corporation and a partnership. That being said, an LLC is not the right form for every type of business. Some companies are better served by a different legal structure. Further, certain types of businesses in California—such as a medical, dental, or nursing practice—cannot be set up as an LLC. An attorney will help you determine whether an LLC is the right form.

2. Selection of State for your limited liability company

When forming an LLC, you also need to decide where you are going to set it up. You may or may not want to make California the home state of your LLC. In some circumstances, setting up an LLC in a different jurisdiction—such as Delaware or Nevada—offers real advantages. In other cases, setting up an LLC outside of California adds complexity with no tangible benefit. A business formation lawyer can help you choose the right state.

3. The applicability of liability protection

One of the central advantages of an LLC is that it offers liability protection. Simply described, an LLC helps to ensure that the members will not be held personally liable for the debts incurred by the business. Of course, the liability protection associated with an LLC is situation-dependent. It may not, by itself, offer adequate liability protection. Additional precautions may be required.

4. Drafting and negotiating an operating agreement

Every LLC should have a written operating agreement. While LLCs doing business in California are regulated by California law, the reality is that many of your personal rights and responsibilities related to the business will be derived from your operating agreement. An operating agreement for an LLC should always be negotiated, drafted, and reviewed by an experienced business formation attorney.

5. Compliance with ongoing requirements for LLCs

Finally, it is important to remember that LLCs must comply with certain ongoing legal requirements in California. In setting up an LLC, an experienced California business attorney can help you understand the ongoing and future requirements so that you are in the best position to comply.

Get Help from Our California Business Formation Attorney Today

Lynnette Ariathurai is an experienced business formation attorney. If you have any specific questions about setting up a limited liability company (LLC), we are here to help. Contact us today to arrange a confidential consultation. We provide business law services throughout the Bay Area.

business formation, business formation attorney, business structure, limited liability company, LLC formation

Negotiating Managed Care Contracts

The health care industry is one of the largest and most complex in the United States. According to data from the Centers for Medicare and Medicaid Services (CMS), total public and private U.S. health spending exceeds $4.1 trillion. Insurance providers play a huge role in health financing. Here, our Fremont business contract attorney highlights some of the key things to consider when negotiating managed care agreements.

What is a Managed Care Contract?

As a starting point, it is important to understand what a managed care contract is and how it works. A managed care contract is effectively an agreement between a medical provider (doctor, specialist, etc.) and a third-party entity. Through a managed care plan, health plan providers will enter agreements with medical facilities to provide care for members at reduced costs. There are a number of different specific types of managed care arrangements, including:

Health Maintenance Organizations (HMOs);
Preferred Provider Organizations (PPOs); and
Point of Service providers.

A Managed Care Agreement is Not Cast in Stone: You Can Negotiate Key Terms

For doctors and other medical providers, there can be advantages to entering a management care agreement. However, similar to any other type of important commercial contract, the specific terms and conditions always matter. A proposed managed care contract is not set in stone. The terms are subject to negotiation. Negotiating an effective agreement requires understanding your needs and your risks. Some key provisions that are subject to negotiate include:

Rates: Rates matter. As noted previously, managed care agreements generally provided lower cost services to members. When doctors and other medical practices enter these agreements, they need to be sure that the reimbursement rate is in their best interest.
Claims Process: The language surrounding all aspects of the claim process should be carefully reviewed. Some key issues to look for include day-of cutoff, downcoding, no take backs, and withholding,
Dispute Resolution (Arbitration Provisions): Disputes can happen within the context of a managed care agreement. A well-drafted agreement will generally have some sort of dispute resolution clause. For example, it may call for arbitration.
Exit Options (Termination, Expiration): In a managed care agreement, it is also important to look at the exit options of each party. Does either party have the right to terminate the agreement? When will the contract expire? What happens after the date of expiration?
Other Unfavorable Provisions: Finally, medical providers should also carefully look for other provisions that may be unfavorable. As an example, some managed care agreements contain language that gives the payor broad (or even unilateral) authority to amend the terms of the contract. This type of language generally needs to be removed.

If you are preparing to negotiate a managed care agreement, there are major advantages to consulting with an experienced attorney. A business lawyer who works closely with medical practices and health care facilities can negotiate, draft, and review your managed care contract to ensure that it is in your best legal and financial interests.

Contact Our California Business Lawyer for Medical Practices Today

A business law attorney with extensive experience, Lynnette Ariathurai works with companies and medical practices in the health care industry. If you have questions about negotiating a managed care contract, please contact our Fremont law office for a strictly confidential initial consultation.

agreements, Contracts, healthcare, managed care

Who Owns a Patients’ Medical Records When a Physician Leaves a Practice?

Physicians have an ethical and professional duty to manage medical records properly. To start, the HIPAA Privacy Rule requires doctors, health care providers, and other parties to protect the confidentiality of sensitive patient medical records. When a doctor moves on from a practice group, it is crucial that all patient medical records are handled in an appropriate manner.

This raises an important question: How should patient medical records be handled when a physician leaves a group medical practice? The Medical Board of California and the American Medical Association (AMA) provide some important guidance. In this article, our Fremont business lawyer explains the key things to know about who owns a patient’s medical records in California.

Background Ownership of Medical Records in California

Medical record ownership varies by state. In California, medical records belong to a hospital or a doctor. With this ownership comes certain ethical and professional obligations to patients. Patients have the right to access their medical records in certain circumstances. Under California Health & Safety Code 123100, patients have a general right to access their medical records and/or summaries. Further, the AMA Code of Ethics 1.1.3(f) states that patients should have the right “to obtain copies or summaries of their medical records.” To comply with statutory and regulatory obligations, group practices must handle medical records properly.

A Note on Professional Courtesy: California law does not require group practice to transfer records between providers. However, the Medical Board of California considers this a “professional courtesy.” The possible cost of copy and/or clerical fees depend on the specific situation.

Medical Board of California: Patient Records When a Doctor Leaves a Practice

The California Medical Board advises practitioners that patients should be notified regarding certain fundamental changes to the structure of a group medical practice. When a doctor leaves a medical practice in California, their patients should be notified and given a chance to make provisions for their medical records.

The AMA has also issued ethical guidance on this matter. Under AMA Code of Ethics Opinion 7.03, patients should be notified when their doctor is leaving a practice group. Further, they should be given the chance to have their medical records retained or forwarded to the doctor’s new practice group based on their preferences.

Medical Practice Agreements Should Address Patient Medical Records

Medical records should be addressed in agreements between doctors. You are always better off discussing and handling this matter at the beginning of a commercial relationship rather than the end of a commercial relationship. Any contracts that your medical practice relies on should have provisions for who owns patient medical records when a doctor leaves the practice. Agreements should include clear instructions for patient notification, including who is responsible for:

Sending out notices to patients
Bearing the cost of sending out notices to patients

Schedule a Confidential Consultation with a California Business Lawyer

Lynnette Ariathurai is a business lawyer with extensive experience working with doctors and other medical professionals. Contact us today to set up a confidential initial consultation. From our Fremont law office, we work with medical practices throughout the San Francisco Bay Area.

health care providers, medical practice law, medical record ownership, Medical records law

The Importance of Having an Attorney Draft a Contract (IT Industry)

Information technology (IT) remains one of the fastest-growing large industries. According to data from Statista, the total value of global IT companies now exceeds $5.2 trillion. Similar to other industries, contracts are at the basis of most commercial relationships in information technology. It is crucial that all businesses operating within the space have well-drafted contracts. Here, our Fremont business contract attorney explains why it is so important to have your contract drafted by a lawyer—especially if you are in the IT space.

Many Companies Need Professionally Drafted IT Contracts

Information technology is an incredibly complex field. Not only regarding the work that is being done, but also in terms of the structure and layering of the business. Along with other types of California companies, your business needs well-drafted IT contracts if:

You are an employer who provides on-site IT services for end-user companies
You are an employer that provides remote IT services for end-user companies
You operate a company that locates and recruits qualified IT professionals

It is especially important to have well-crafted contracts in place if you own and operate a recruiting company that finds IT professionals for end-users for a fee. Likewise, end-user companies that work with IT recruiting firms must ensure that their best interests are properly protected by the terms of the contract.

Companies that provide direct IT services to end-users can benefit from customized contracts. These IT firms may be located within the United States, outside of the United States, or a combination of both. There may be situations in which one company has access to the job opening and another company has access to the IT talent. Contracts govern these commercial relationships.

When Disputes Arise, the Terms of the Contract Matter

There are several reasons why well-drafted contracts are especially important for IT industry companies. When a contract dispute arises, the specific terms of the contract will, in large part, determine your company’s liability risk. A poorly drafted contract could dramatically increase your company’s liability in a dispute. Among other things, IT-related disputes arise over:

Serious professional errors by IT professionals
Alleged non-payment of fees to one or more companies involved in the chain of workflow
Employee is hired directly by the end user or one of the other companies in the many layers

One of the challenges faced by IT industry employers—whether contracting with an end-user for on-site or remote services—is that it can be difficult to stay on the same page. For example, problems could arise if an IT employee puts in overtime hours without the proper authorization. Also, if the employee is hired by the end user or another company to provide services to the end user, you are essentially cut out of the deal. Without a well-drafted contract, an IT employer could end up on the hook for additional costs or loss of income.

IT Companies Without Strong Contracts Risk Higher Costs, Decreased Revenue

Ultimately, it is the contract that will, in large part, determine each company’s liability risk. Imagine that an IT employer is not promptly advised of changes regarding a particular employee’s schedule. Payment for their services could prove to be complicated. The ability to invoice another company for work provided depends on the terms and conditions of the contract.

Another similar situation could arise when an end-user believes that an IT professional was working on the wrong tasks and/or the end-user is dissatisfied with an IT professional’s skills. Each party’s financial responsibility for any work performed will depend on the contract. The right contract puts your company in the best position to get paid (or avoid paying) for certain work.

Disputes over total payment for work provided is one risk that employer companies face in the IT industry. An even greater risk is if another company or the end user steals your employee. It is expensive and time-consuming to locate and retain skilled IT professionals. Employer companies could be stuck with major losses of revenue if they do not have well-drafted contracts in place.

A Contract Should Be Structured to Meet Your IT Company’s Unique Needs

When a business law attorney drafts a contract, they do so with the rights and interests of their client in mind. As every situation is different, it is crucial that IT companies retain a lawyer who can draft a contract that is well-tailored for their specific circumstances. Information technology companies that don’t understand the importance of having an attorney draft a contract sometimes use formulaic contracts from the internet, taking on significant risk. They may be unknowingly shifting a large amount of liability risk back to their firm or not protecting themselves from other losses. An experienced California business attorney can draft a contract that effectively minimizes liability risks and ensures that your IT business is in the best possible position.

Contact Our Fremont, CA Business Contract Attorney for Help

Lynnette Ariathurai is a business law attorney with extensive experience drafting, negotiating, and reviewing contracts. Call us now or send us a message for a confidential consultation. From our Fremont law office, we help clients with business contracts throughout the Bay Area.

business contract, contract law, information technology, IT, liability