In a recent opinion out of Ohio’s Twelfth District, a family owned and operated business was sued by a shareholder/employee when his employment was terminated. It appeared the company provided certain vehicle benefits to all shareholders, even if they were not employees of the company. However, when the shareholder/employee was terminated from his employment, he sent a letter to the company demanding the title to his and his wife’s vehicles be transferred into his name, pursuant to the “employment benefits.” Oftentimes, this type of letter will not be admissible at trial. However, in this case, it was admitted. This letter made it difficult for the shareholder/employee to prove that the vehicles were, in fact, a shareholder benefit rather than an employment benefit. If the shareholder/employee had been able to prove his case, the company would have had to transfer the vehicles to the shareholder/employee and his wife.
The takeaways from this case:
- Just because you are in business with family does not mean you should not have an attorney draft the appropriate employment and shareholder agreements needed to protect the employees and shareholders as well as the company.
- Be cautious in trying to settle a dispute on your own. What you send in writing is permanent, and can be used against you.
A properly drafted shareholder’s agreement that outlines the shareholders’ benefits and a properly drafted employment agreement outlining employees’ benefits could have saved the company a lot of headache in this matter. Litigation is costly, and appeals are even more costly. You shouldn’t see your corporate attorney as an expense. You should look at the attorney as an asset who can protect you and reduce your legal exposure.
If you’d like your employment agreements reviewed, or you are interested in starting a business, feel free to reach out to get an idea of what legal services for Akron businesses we could provide you.