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2015 Legal News

Employment Law:

            ·        OSHA – Revised Regulations and Notice Posting:

Early this year the federal Occupational Safety and Health Administration (OSHA) revised certain workplace rules, adding some industries to required recordkeeping rules and removing some others. OSHA’s summary describes this change as follows:

The rule updates the list of industries that are exempt from the requirement to routinely keep OSHA injury and illness records …. The previous list of industries was based on the old Standard Industrial Classification (SIC) system and [1006-1998] injury and illness data …. The new list of industries that are exempt from routinely keeping OSHA injury and illness records is based on the North American Industry Classification System (NAICS) and injury and illness data from the Bureau of Labor Statistics (BLS) from 2007- 2009.  

To see if your company is exempt from the new record keeping rules, check your NACIS code against the following OSHA link:

             https://www.osha.gov/recordkeeping/ppt1/RK1exempttable.html

(If you are unsure of your NACIS, check for that at the U.S. Census Bureau NAICS website.)

Notes:

The new rule retains the exemption for any establishment with ten or fewer employees, regardless of their industry classification, from the requirement to routinely keep records

The revised rule also expands the list of severe work-related injuries and illnesses that all covered employers must report to OSHA. The revised rule retains the current requirement to report all fatalities within 8 hours and adds the requirement to report all inpatient hospitalizations, amputations and loss of an eye within 24 hours to OSHA.

 As for notice to employees, while a new workplace poster is not immediately needed, it might make sense to put it in place now anyway. An OSHA sample version can be found at its following web page:

https://www.osha.gov/Publications/osha3165-8514.pdf

 

  • Family and Medical Leave Act (FMLA):

New Notice and Certification Forms: The federal Department of Labor (DOL)

recently issued a number of new FMLA notice and certification forms, including as to health care provider and military leave statements. If your company is FMLA covered (generally meaning you have more than 50 employees), it is probably wise to update your forms.

 

Constitutional Law:

Who moved my raisins?” – US Supreme Court – Court Prohibits Government Taking of Certain Private Property

It only took about 75 years, but California raisin growers finally challenged a Great Depression era law that required them to turn over to the government a portion of their annual crop, without getting paid for doing so. The US Constitution’s “taking clause” has long been applied to, in particular, the taking of real estate by the government, requiring “just compensation” for same; think, for example, a road widening that cuts into a portion of someone’s real estate. It’s pretty amazing that this “raisin rule” lasted all these years, unchallenged; but it’s now gone. And the just compensation  right established by the court ruling (Horne v. the United States Department of Agriculture) will likely extend well beyond raisin farmers.  

“This is a very important case for small business owners because it limits the government’s power to take private property,” according to Karen Harned, Executive Director of the National Federation of Independent Business’ Legal Center. Otherwise she said, “It would be as if someone came into a store and forced the owner to hand over merchandise; that’s blatant robbery as far as we’re concerned.”   

 

Contract Law: 

Contractual Time Limits on Right To Sue (Contract based “Statutues of Limitations”) Upheld.

 

In a case decided in Delaware, the state court upheld time limits on rights to sue contained in a contract that were shorter than time limits otherwise provided by law (that is, by statute). ENI Holdings, LLC (“ENI”) sold a certain company it controlled to KBR Group Holdings, LLC (“KBR”). (It was a stock purchase deal for about Two Hundred Fifty Million Dollars ($250,000,000.) The deal was subject to post-closing working capital adjustments. The Sale Agreement contained a fifteen (15) month limitation on certain types of legal claims. Delaware’s statutory time limit for such claims was 3 years. The Buyer and Seller disputed the working capital adjustments and, so, the final purchase price due. ENI sued in Delaware for breach of contract and KBR filed counter-claims against ENI. KBR’s counter-claims were filed after the fifteen (15) month contract-based time limitation, but before the end of the Delaware three (3) year statutory time limit. The Court upheld the shorter contract-based time limit. Consequently, certain of the KBR counterclaims were tossed out by the Court. While it is a Delaware case and, among other things, statutory time limits (formal “statutes of limitations”) vary from state-to-state, the concept that contract rights (and limits) matter was key to this outcome.

 

 Tax/Estate Planning:

            Changes to Powers of Attorney – A reminder that the form and the effects of Powers of Attorney (POA’s) in Pennsylvania changed this year, including, among other things, POA’s must now be both witnessed and notarized, the language of notice to the principal as well as the agent’s acknowledgement have both been changed, and the agent’s liabilities and duties have been modified. (Some of the law impacting the ability of third parties to rely on POA’s has also been modified.)

 

            Unified Credit” in 2015. Another reminder: the IRS (Federal) limit on tax free transfers while living, or at death, now stands at $5,430,000 for 2015 (up from $5,340,000 in 2014). Together sometimes called the “unified credit,” these exclusions may be available to transfer assets at either stage (lifetime or at death) or a combination of both.  

 

Real Estate:

 Large Recent Ruling for Major Commercial Tenant v. Mall Ownership A jury has awarded Lord & Taylor $31,000,000 in a case where it alleged mall ownership breached its contract to keep an enclosed-mall open for many years to come. The owners of the White Flint Mall (Rockville, MD), one of whom includes the majority owner of the Washington Nationals baseball team, wanted to convert the mall into a combination of shops, apartments, a hotel and other open-space, more in keeping they believe with current shopping trends. According to court documents, the landlord spent millions of dollars to buy out tenants. However, Lord & Taylor did not budge and decided to fight. The landlord says it will appeal. [As with the ENI/KBR case discussed above, contract terms can matter….]

 

Employment LawNew Jersey – Independent Contractors – New Rule:

            The New Jersey Supreme Court recently departed from the federal legal test for determining if a person is an “employee” or an “independent contractor” – and very much expanded exactly who falls into the “employee” category (for which, of course, among other things, the employer must pay and withhold payroll taxes). The New Jersey legal test is now the “ABC” test, requiring the company to prove that:

 

  • the person is free from control or direction over the performed services;
  • the service is either outside the usual course of the business for which it is performed or the service is performed outside the places of business for the company; and
  • the person is customarily engaged in an independently established trade, occupation, business or profession.

Under “ABC” the person is presumed to be an employee unless the employer can prove all 3 of these ABC’s.

 

 Employment Law – Philadelphia adopts Paid Sick Leave Rule:

           As  of May 13, 2015 private Philadelphia employers with 10 or more employees (with some exceptions) will be required to offer paid sick leave. (Several New Jersey towns have adopted similar ordinances.) The Philadelphia rule applies to all full-time and part-time employees who work at least 40 hours per year.  To determine whether an employer meets the (low) minimum of 10 employees, companies must take into account all persons paid on a full-time, part-time or temporary basis. The Ordinance does not specify that the 10 employees must all be employed in Philadelphia. (So an employer with 10 or more employees, with fewer than that number actually working in Philadelphia, will likely have to provide their Philadelphia-based employees with paid sick leave.) The rule provides accrual calculations and limits, including an employee must be employed for at least 90 days before being able to use any accrued paid sick leave. Notice and posting requirements are part of the rule; and employee handbooks should be updated to reflect applicable notice requirements.

 

Tax Law – Internet Sales – Nationwide Application:

           As part of the recent US Congress spending bill, legislators voted to extend the prohibition on internet sales tax until at least October 2015. There is at least one bill in the US Senate to make that moratorium permanent, but whether that will pass is unknown.

 

Tax Law –Pennsylvania – Real Estate Transfer Tax – Broadened Definition of “Real Estate Company:”

           The Pa Revenue Department, via recent Notice, has broadened its definition of  a “real estate company,” so as to potentially tag more of same with a State real estate transfer tax bill when such companies change their ownership.  

Before this Revenue Department notice, following related PA law changes, a “real estate company” (otherwise defined in the law) did not include a company that owns, as at least 90% of the fair market value of its assets, an interest in a real estate company. Now it does. There are a number of matters to consider when planning a transfer of ownership in a “real estate company” under Pa law (including the timing of such possible ownership interest transfer, as well as whether certain events took place before and after January 1, 2014); but the upshot of this new Revenue Notice is that, at least without considering careful tax planning, an unexpected real estate transfer tax bill could come due.

 

Health Care Law – Feds very busy with HIPAA investigations:

           News of the recent cyber-attack and resulting data breach at health insurance giant Anthem Inc. raised the profile of concern over data security and data breaches. The Anthem breach (where it is estimated that 1 in 4 adults were impacted) reminds those companies subject to the Health Insurance Portability and Accountability Act (HIPAA) that failing to keep protected health information secure and private can lead to big problems.   Enforcement of HIPAA’s Privacy and Security Rule was at an all-time high last year, with the U.S. Department of Health & Human Service’s (HHS) Office for Civil Rights (OCR) resolving a number of large cases. (Anthem, the former Wellpoint, runs health-care plans under the Blue Cross Blue Shield, Empire Blue Cross, Amerigroup, Caremore, Unicare, Healthlink, DeCare, HealthKeepers and Golden West brands.)

 

Franchising – Nationwide Advertising by Franchisors – Court jurisdiction not necessarily “nationwide:”

           While it was in New Mexico, a recent court decision held that national advertising campaigns will not establish personal jurisdiction in every state in which the campaign runs.  The case involved the Holiday Inn chain and its national TV ad campaign. The Court of Appeals in New Mexico confirmed a lower court ruling to the same effect. While this was a New Mexico ruling, nonetheless it was a good ruling for franchisors with national footprints. But, as is so often the case with franchisors, their “level of control” over local matters can change legal outcomes. (There is also, and also to franchisor’s favor, older case law from New Jersey that essentially says that national advertisements alone by a nonresident defendant cannot support personal jurisdiction over that nonresident defendant.)

 

Business Law: Non-Competition Covenants in a Franchise Agreement is Upheld:

           This one comes from Minnesota, where a District Court issued a preliminary injunction in favor of a franchisor to stop its former franchisee from competing against the franchisor, due to a non-competition and confidentiality agreement the ex-franchisee had signed. The suit argued unpermitted use of confidential client lists, breach of the promise not to compete within a certain geographic area, and infringement on the franchisor’s trademarks. While the franchisor got its injunctive relief (stopping the breaching behavior), the validity, and extent of enforceability, of “non-competition” agreements is very State specific. If a company operates in more than one State, it ought to be sure that the terms of its non-compete (and confidentiality, etc) provisions are actually enforceable in each State where the company has employees.

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