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Entrepreneurship in Germany

A survey of entrepreneurial activity and climate throughout the EU conducted on behalf of the European Commission in 2008 revealed that Germany scored “average” on all of the entrepreneurial activity indicators, such as overall entrepreneurship rate and the rate of business failure, but that there was a high share of opportunity-seeking, risk-taking “pull” entrepreneurs in Germany.  Germany was found to be good breeding ground for entrepreneurship with respondents being generally optimistic about the chances for success in starting a new business and relatively unconcerned that entrepreneurship would be viewed negatively or that failed entrepreneurs would not be given a second chance.  Interestingly, the researchers found that more than half of the entrepreneurs were living in rural areas, the high proportion among the EU countries studied, and that German respondents from rural areas were almost as likely to be entrepreneurs as respondents living in urban or metropolitan areas.  An important finding was that the Germans were less likely than respondents in the other EU countries studied to say that their education helped them to develop an entrepreneurial attitude and develop an interest in entrepreneurship, thus leading the researchers to recommend that further resources be devoted to entrepreneurial education in Germany.

Results from several 2012 surveys of attitudes regarding entrepreneurship in Germany reported on by The Economist on October 5, 2013 revealed a touch of reticence, with data from the Global Entrepreneurship Monitor indicating that the percentage of Germans agreeing that starting a business was an attractive idea stood at just under 50%, well below comparable percentages in several other European countries such as France (65%), the Netherlands (79%) and Poland (68%).  Figures compiled and released by Deutsche Bank indicated that a little less than 3% of the German population fell into the category of “new entrepreneurs”, defined as owners of businesses aged three months to three and a half years who had open those businesses by choice rather than necessity, while the comparable percentage in the US was just under 8% and high percentages were found in the Netherlands, the UK, France and Sweden.

Potential entrepreneurs in Germany still face cultural restraints to innovative risk-taking and lack the support and access to networks that has been so crucial for success in Silicon Valley.  One Berlin entrepreneur interviewed by Westervelt for a post for NPR All Tech Considered that appeared in July 9, 2012 commented that the German business world remains conservative and highly risk averse and, in fact, in Germany venture capital is commonly referred to as “risk capital”, a descriptive reminder of the aversion to risk among the German business community.  The 2012 GEM report found that 42% of the Germans surveyed would be deterred from starting a new business due to a fear of failing—comparable percentages in the Japan and the US were 53% and 32%, respectively—and commentators suggested that Germans were reluctant to view business failures as opportunities to learn for the next time and instead saw them as a sign that perhaps the best course of action was to return to a more stable career path with a university or one of the larger, more established German firms.

Many German entrepreneurs begin their careers by following traditional educational paths with the ultimate goal of becoming a scientist or engineers in academia or with one of the large German multinational companies.  If they encounter an idea that might be a feasible basis for a new start-up they often find that their supervisors discourage them from pursuing the project and that it is difficult to find local professional advisors who can assist them in developing plans to launch a new business.  In contrast, entrepreneurs in the US frequently get support from their universities and employers to explore new ideas and, quite importantly, have ready access to venture capitalists and professional advisors that provide access to their networks to assist the entrepreneur in making connections with incubators to secure space to pursue their projects, angel investors to provide seed funding, potential customers and technical and managerial talent to build out their teams.  Some commentators believe that there are signs of change and that entrepreneurship, working with technology-based start-up companies, is gradually but surely becoming recognized as a legitimate career path for young Germans just graduating from universities.

Another criticism that has dogged the technology scene in Berlin has been a reputation for copying business models first developed in the US as opposed to focusing on creating homegrown innovative ideas.  Scott, writing in the New York Times: Deal Book on April 29, 2013 on technology start-ups in Berlin, noted that critics have pointed to the Samwer brothers, who made substantial amounts of money incubating and selling German versions of eBay and Groupon to their original creators in the US and then used the proceeds of those sales to invest in companies that were essentially local versions of Facebook, Zappos and Zynga.  The Economist discussed Rocket Internet, the incubator established and managed by the Samwers, has become renowned for its “storm-the-barricades culture” and simultaneously funding several similar companies that share resources as they rush to be the first to succeed with respect to a common business model.


US Importers Should Establish Basic Customs Law Compliance Procedures

Importing goods into the US requires compliance with US Customs law, which is actually a complex set of statutes, rules, procedures and regulations that are located in a variety of sources. In addition to the statutes and regulations pertaining to determination and collection of customs duties, there are numerous laws and regulations pertaining to import transactions, particularly those that deal with various aspects of international traffic and trade. Moreover, given that imports present serious and substantial homeland security issues for the U.S., a plethora of new restrictions and procedures have been adopted to reduce the risk that terrorists will use U.S. ports to import dangerous and illegal items into the U.S.

General explanations of basic import requirements are provided on the website of the US Customs Service (“Customs”) at In addition, Customs regularly updates and revises a publication called Importing into the United States: A Guide for Commercial Importers (Importing Guide). The Importing Guide, which is written with the new importer in mind, is an extremely useful Customs resource. It provides the importer with a nuts-and-bolts type of guidebook to the importing process. It contains a great deal of general and specific information concerning basic import requirements, including lists of quotas and other restrictions on a variety of generic merchandise. A more succinct, but still very helpful, pamphlet on importing is also published by Customs is United States Import Requirements. This Customs resource offers only very general explanations of basic import requirements. It does, nevertheless, contain a number of references to other relevant Customs publications or sources for obtaining additional information.

Both Customs and the International Trade Resource Center offer the following suggestions of strategies for importers and their suppliers to work together in speeding up the customs clearance process: 

1. Include all information required on your Customs invoices.

2. Prepare your invoices carefully. Type clearly. Allow sufficient space between lines. Keep the data within each column.

3. Make sure that your invoices contain the information that would be shown on a well-prepared packing list.

4. Mark and number each package so that it can be identified with the corresponding marks and numbers appearing on your invoice.

5. Show on your invoice a detailed description of each item of merchandise contained in each individual package.

6. Mark your goods legibly and conspicuously with the name of the country of origin, unless they are specifically exempted from the country-of-origin marking requirements, and with such other marking as required by the marking laws of the United States. Exemptions and general marking requirements are detailed in the Importing Guide.

7. Comply with the provisions of any special laws of the United States that may apply to your goods, such as the laws relating to foods, drugs, cosmetics, alcoholic beverages, radioactive materials, and others.

8. Observe closely the instructions with respect to invoicing, packaging, marking, labeling, etc., sent to you by your customer in the United States. He or she has probably made a careful check of the requirements that will have to be met when your goods arrive.

9. Work with Customs in developing packing standards for your commodities.

10. Assure the security of your goods is maintained at all times. That means, for example, not allowing your goods to become a hiding place for illegal drugs or other contraband.

11. Consider using a carrier that utilizes the Automated Manifest System and a customs broker participating in Automated Broker Interface (ABI).

Companies should establish an internal department or unit to oversee importing activities and should create and enforce internal policies relating to compliance with laws and regulations governing the entry of goods in to the US, with special emphasis on steps that need to be taken to comply with US customs laws by preparing and filing appropriate documents, making sure that all applicable tariffs and duties are paid, and keeping all required records pertaining to importing activities.  For information on how to help your clients with customs law compliance, see Business Transactions Solution at Westlaw Next.


Berlin: Germany’s Bid for the “Next Silicon Valley”

Start-ups are being launched at a dizzying pace in Berlin, a phenomenon that has vaulted the city into the worldwide pantheon of aspiring innovation hubs.  According to an article in WIRED magazine in October 2013, “Berlin has been the most talked-about (and talked-up) startup hub in Europe for several years”, and WIRED also reported that there has been an increase in the number of accelerators and incubators in and around Berlin and that access to capital for startups appears to have improved.  However, skeptics question whether the Berlin start-up scene is more about chic art galleries and hip music and less about serious long-term innovation that will ultimately begin to produce a stream of truly global technology companies.  Berlin entrepreneurs have been criticized for often relying on replication of business models developed elsewhere as opposed to identifying and developing their own ideas and Berlin start-ups struggle with shortages of qualified designers and engineers, difficulties obtaining venture capital funding, an immature local innovation infrastructure and a societal culture that, while changing, remains relatively risk averse and is typically slow to encourage nascent entrepreneurs to follow their passions and form their own company as opposed to traditional career paths.  While there have been several successful local firms, they are often sold to larger foreign multinationals and Germany has not been the birthplace of a truly global technology company since SAP was born in 1972.

Berlin, which has been referred to as a relic of the Cold War unable to modernize with the same speed and vigor as other German business centers such as Hamburg and Frankfurt, has recently undergone a renaissance of sorts that has turned it into one of the most discussed, and fastest growing, communities for start-ups in the world.  Low rents, coupled with stylish art galleries and a surging underground music scene, have made Berlin a magnet for engineers and designers and Berlin’s technology companies have gathered support from national and local politicians.  The creative atmosphere that has emerged in Berlin’s innovation community has been especially conducive to the launch of video gaming firms that have developed games that have gathered international followings and help put Berlin on the map for international investors and encouraged global technology companies, such as Google, to invest in local companies and incubators and look to the area as fertile ground for possible acquisitions.  In addition to video gaming, Berlin has been the home for successful startups focusing on mobile advertising, online shopping and audio-sharing Web services.

Arguably the biggest potential asset for Berlin in its attempt to become a global innovation cluster is the city’s ability to attract large numbers of creative people; however, the area has a long way to go to move beyond chaotic enthusiasm to the robust, mature networks found in Silicon Valley.  Berlin has developed a unique, and somewhat dazzling, “startup scene” that includes cafes filled with dozens of people working away on their laptops and holding mini-meetings.  However, for commentators like Westervelt, who mused about whether Berlin would be “The Next Silicon Valley” in a post for NPR All Tech Considered that appeared in July 9, 2012, the question is just how many of those people are working on a serious business plan as opposed to simply blogging about their experiences and how much fun it would be part of launching the next Facebook.  Berlin’s innovation cluster has yet to produce a steady stream of successful exits (i.e., large acquisitions by multinationals in deals worth more than $1 billion or lucrative initial public offerings); however, there have been smaller acquisitions deals with well-known companies from the US (eBay, Google and Groupon) and Japan (Panasonic).

Since the end of the 2000s Berlin has been capturing a larger share of the startups launched in Germany and research published by McKinsey & Co. In October 2013 indicated that for every new business set up in Munich 2.8 companies were started in Berlin.  Berlin is attracting startups by offering cheaper rents for residential and office units than other European innovation clusters and one now finds startup events going on daily in Berlin with large crowds attending.  The Institute of the German Economy has released statistics that showed that by 2013 Berlin had passed Munich to become Germany's main hub for venture capital investment.  Although the Berlin start-up scene, and its focus on digital innovations, has achieved a large amount of attention, entrepreneurship also flourishes outside of Berlin in sectors such as chemistry and engineering that have been particular strengths of German business since the Nineteenth Century.


Preparing a Client Alert on Family, Medical and Military Leaves

Your clients need to understand their obligations with respect to granting family, medical and military leaves to their employees.  A good way to get the conversation going with your clients is to provide them with a Client Alert on the subject.  The following is a good way for you to get started:

The federal Family and Medical Leave Act (FMLA) requires covered employers to provide eligible individuals with up to 12 workweeks of unpaid leave per year for the birth, adoption, or foster care placement of a child; or serious health conditions of employees or their children, spouse, or parents.  In addition, the FMLA includes two military family lead entitlements—the military caregiver leave and the qualifying exigency leave. Under the terms of the military caregiver leave eligible employees are entitled to take up to 26 weeks of job-protected leave in a 12-month period to care for a covered service member with a serious illness or injury incurred in the line of active duty. The qualifying exigency leave can be used by eligible family members to take up to 12 weeks of FMLA leave for “qualifying exigencies” arising out of a covered military member's active duty status, or call to active duty, in support of a contingency operation. Under the FMLA regulations promulgated by the federal Department of Labor (DOL) the following events would qualify as “qualifying exigencies”: short-notice deployment (i.e., called to active duty seven or fewer days prior to the date of deployment); military events, ceremonies or programs related to active duty or related activities; childcare and school activities; financial or legal appointments; counseling; rest and recuperation; post-deployment activities (e.g., arrival ceremonies and reintegration briefings); and additional activities agreed upon by the employer and employee.

Covered employers must also give information to employees about their rights under the FMLA, post various notices including prescribed information, and include information about the FMLA in their personnel handbook.  They must also prepare records concerning basic payroll information required by wage and hour laws, dates FMLA leave is taken (or hours, if taken in increments of less than a day), copies of FMLA notices that they give to employees or that employees give to them, copies of written policies about benefits and the taking of leaves, premium payments of employee benefits, and any dispute between them and employees regarding FMLA leave.

Generally, employers are covered by the FMLA if they have 50 or more employees on their payroll for at least 20 calendar weeks in the current or preceding calendar year.  To be eligible for FMLA leave, employees must Have been employed for at least 12 months by the covered employer, work at least 1,250 hours in the last 12-month period, be at a worksite that is within 75 miles of where at least 50 employees work, have a specified family care or medical problem, provide reasonable advance notice and appropriate certificates, and not have exhausted their 12-workweek maximum for the current 12-month period.  Time spent on vacation or sick leave may be applied towards the 12-month requirement as long as the employee is maintained on the payroll and is receiving other benefits from the employer such as group health plan benefits and workers' compensation coverage.

In order to satisfy the requirement of a “serious health condition” there must be an illness or injury involving either inpatient care or continuing treatment by a health care provider. The continuing treatment requirement is satisfied if an employee is incapacitated for more than three consecutive days and does one of the following: (1) visits a health care provider twice within 30 days of the first day of incapacity (unless extenuating circumstances prevent a follow-up visit), with the first visit coming within seven days of the first day of incapacity; or (2) sees a health care provider within seven days of the first day of incapacity and then begins a regimen of continuing treatment under the provider's supervision (e.g., physical therapy, medication etc.).

The FMLA regulations include various forms of certifications that must be used to request FMLA leave including certifications of health care providers regarding the existence of a serious health condition and certifications. Certain employer representatives, such as human resource professionals and leave administrators, are permitted to contact an employee's health care provider to clarify and authenticate a certification of medical condition received from the provider.

The federal regulations in this area are complex and the situation may be even more complicated when state laws are factored into the analysis regarding a particular employee's request for family and medical leave.  Please contact our offices for assistance in understanding your obligations under the FMLA and in preparing and/or updating key policies and forms including a general statement of employee rights under the FMLA, a description of family and medical leave rights to be included in their personnel handbook and a separate description of rights relating to military leaves.

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Additional information on the FMLA and other employment law matters is available in Business Transactions Solution on Westlaw Next.