Most employees in the U.S. are “W-2” workers, who are paid an hourly wage and are covered by the Fair Labor Standards Act, a federal law enacted in 1938. Because of its broad coverage, the Fair Labor Standards Act applies virtually to all hourly employees and all employers.

The FLSA sets minimum standards for minimum wages, overtime pay, record keeping and child labor.  Violations of the FLSA are investigated and enforced by the Department of Labor.  From 2007 to 2011, the DOL conducted 68,644 enforcement actions, found violations in 73% of its investigations and collected back wages for employees from employers totaling $681,151,513.00 or about $13,524.57 per case.  These numbers do not include statutory damages or awards for reimbursement of attorney’s fees. (more…)

The Top 10 Reasons for Fair Labor Standards Act Violations

Employee turnover is a part of life for every business, large and small. But when employees leave they often take with them important knowledge about their employer’s business. This essential company know-how, referred to by courts as “trade secrets,” is critical to the success of any business.

There are important considerations for employers and employees alike when it comes to protecting trade secrets. If an employer fails to properly protect its trade secrets, years of knowledge about the employer’s customers, pricing, profit margins, suppliers, processes, products and development initiatives can walk straight into the arms of a competitor when a key employee leaves. Similarly, if an employee fails to understand his or her obligations to a former employer a costly lawsuit may be on the horizon.  Here are five practical safeguards to help employers and employees navigate this critical issue.

  1. Clearly identify trade secrets. Employers and employees both need clarity on what constitutes a trade secret. New York courts have consistently held that a trade secret is something that is actually secret, and gives a business a competitive edge in the marketplace. Employers should create a list of the trade secrets they want to protect and then have key employees with access to those trade secrets sign a properly tailored confidentiality and non-disclosure agreement. When the trade secrets include sensitive customer information a non-solicitation or non-competition agreement may also be necessary. This will give protection to the employer and clarity to the employee on what is protected when he or she leaves employment by the employer for any reason.
  2. Secure and protect trade secrets. Identifying a trade secret in a non-disclosure agreement is not enough! An employer also should implement appropriate security measures to protect its trade secrets. At a minimum, files that contain trade secrets should be backed up and access should be password protected and limited to those employees who have a need to know. Employees should know that their access to company trade secrets is monitored. A periodic review and audit of the security protections for trade secrets will go a long way to ensuring that they are protected and that employees are accessing and using them properly.
  3. Manage employee departures. The moment an employee announces his or her departure the employer should limit and monitor any further access to the company’s trade secrets. The employee should be reminded of his or her obligations under any non-disclosure, non-solicitation, or non-competition agreement, and should be informed that an image immediately will be made of the employee’s company hard drive to protect files and information from erasure, printing or electronic download. This upfront review of the employee’s obligations and restricted access to the company’s trade secrets will make the employee’s departure easier in the long run for both sides.
  4. Thoroughly interview new hires. Protecting trade secrets is a two-way street. Employers need to make sure that they do not hire people who are bringing a competitor’s trade secrets into the workplace. Failure to do so could result in a costly lawsuit. Interviewers should be instructed to thoroughly inquire about an applicant’s former employment and whether the applicant has signed an employment agreement with a non-disclosure, non-solicitation, or non-competition provision. New hires should be told not to bring anything with them from their prior job and to sign a certification that they have not done so.
  5. Review and train. No matter how strong a trade secret protection plan is, it will fail if it is not regularly reviewed by both the employer and its employees. Employers should regularly review their trade secret policies to ensure that they are robust and cover newly developed know-how and provide periodic training that explains the importance of trade secrets to the employer’s continued success and the harm to the company and its workers that unauthorized disclosure will cause.  Similarly, employees should regularly review their employment agreements to ensure that they are in compliance with their obligations to their employer.

While trade secret litigation has become a more frequent occurrence, much of the need to run to court can be alleviated if employers and employees follow basic practices to ensure that trade secret policies are clear, concise, understood and followed.

Terence Robinson is a Partner at Boylan Code LLP, a full service law firm with more than fifty legal professionals focused on serving you, the client. Offices are conveniently located in Canandaigua, Newark, and Rochester. This article is not legal advice.

Email: trobinson@boylancode.com.
LinkedIn: www.linkedin.com/in/terence-robinson-25382921/

To read the published article in the Daily Messenger, click here.

 

Reducing Trade Secret Disputes between Employers and Employees

On June 20, 2017, the Council of the City of Rochester passed Ordinance No. 2017-163, amending Chapter 63 of the Municipal Code with regard to housing discrimination on the basis of source of income. Rochester area real estate professionals have long had the obligation to act in accordance with the City equal opportunity ordinance, which protects certain protected classes from housing discrimination. The new ordinance adds source of income to age, race, creed, color, national origin, gender, gender identity or expression, sexual orientation, disability, and marital status as a protected class. The amended ordinance was adopted and went into effect on June 21, 2017. Similar legislation has already been passed and implemented in both Buffalo and Syracuse.

While the amended ordinance pertains to anyone dealing in the sale, rental, or leasing of housing—and their agents—this article will focus specifically on the consequences to landlords and their agents.

As of June 21, a landlord in Rochester must consider as income any payments received from “a lawful occupation or employment, as well as other payments including, but not limited to, pensions, annuities, public assistance, supplemental security income, social security disability insurance, unemployment benefits, Housing Choice Vouchers (formerly known as Section 8), other housing voucher or subsidy programs, and any other governmental or charitable subsidy.” (Municipal Code § 63-2).

The amended ordinance makes it unlawful for a landlord, or their agent, to refuse to show, sell, transfer, or lease to anyone on the basis of their source of income. Furthermore, a landlord cannot exclude, deny, restrict, segregate, or otherwise limit or differentiate persons based on their source of income.

Landlords must take care to ensure that no statements in their written materials either directly or indirectly discriminate on the basis of source of income. Written materials include, but are not limited to, advertising, publications, application forms, and lease materials. For example, an advertisement that either explicitly forbids or dissuades applicants with Housing Choice Vouchers from applying for housing would violate this ordinance.

The new ordinance contains exceptions from liability for inquires, required disclosures, and required verifications of a prospective tenant’s source of income “that is necessitated by a Federal, State, or local law that is generally applicable, applicable to the housing at issue, or applicable to the financing or subsidies necessary to a person’s purchase or leasing of such housing.” (Municipal Code § 63-5(D)(1)).

Importantly, the amended ordinance does not preclude a landlord from refusing to rent or lease housing to a prospective tenant due to insufficient income. There is not a prescribed test for calculating insufficient income, however whatever test a landlord chooses to apply must be applied equally to all prospective tenants. Furthermore, a landlord may refuse to rent or lease housing to a prospective tenant that has failed to timely pay rent during part or all of the preceding 18 months. Neither of these refusals to rent are considered discriminatory as long as the selection criteria are applied equally to all prospective tenants, regardless of their source of income.

There are steps that landlords can take to protect themselves from inadvertent source of income discrimination. First, a landlord should apply all income requirements for tenants and prospective tenants equally. For example, a prospective tenant with Housing Choice Vouchers cannot be required to provide proof of greater income than is required of an applicant whose income is derived solely from wages. Second, the landlord should notify all applicants of legal sources of income and inform them that all enumerated sources are considered as income. This could be accomplished in a variety of ways, such as updating the language of the lease agreement to reflect changes in the ordinance. Third, the landlord may offer applicants a full opportunity to provide verification of income and ensure that required verification is not unreasonably burdensome. Verification of income may be considered to be unreasonably burdensome if the required verification for applicants using public assistance is more difficult than the verification of income required from wage earners. Fourth, a landlord should ensure that ancillary factors do not favor or disfavor applicants based on their source of income. An example of this may be setting a security deposit at a level that precludes certain applicants based solely on their source of income. It is also beneficial to review lease materials to ensure that nothing either deliberately or inadvertently has the effect of discriminating based on source of income. The preceding steps are illustrative and not meant to be an exhaustive list of all precautionary measures.

One notable topic that every landlord should be aware of is that they must consider future sources of income that are contingent on the applicant obtaining a lease. Examples of such income could include public assistance, supplemental security income, Housing Choice Vouchers, or other voucher or subsidy programs. To avoid liability for discrimination, a landlord could provide each applicant a written list of all sources of income that will be counted towards their overall income—including any future subsidies that may be contingent on the applicant obtaining a lease. Additionally, the list should describe what, if any, additional verification may be required for conditional future subsidies—taking care to ensure that such requirements are not unreasonably burdensome.

The new amendment does not prevent a landlord from requiring that all prospective tenants pass the same credit, reference, or income sufficiency requirements that are required of all tenants. As long as such checks are nondiscriminatory and equally applied to all applicants, such tests are not in contravention of this ordinance.

This amendment to Chapter 63 of the Municipal Code certainly represents a significant change for landlords. However, awareness of the changes and proper precautions, as discussed above, can help a landlord decrease their exposure to potential source of income discrimination suits—which can result in injunctive relief, compensatory and punitive damages, and the imposition of fines and penalties.  Landlords can still require that prospective tenants meet certain criteria, as long as that criteria are applied equally to all applicants irrespective of their source of income.

If you have any questions or are interested in learning more about the new ordinance, you’re welcome to attend the Boylan Code Real Estate Roundtable Friday, August 4, 2017 at 8:30am. The roundtable will be at Boylan Code’s office in the Culver Road Armory. Please email jcain@boylancode.com if you’d like to attend.

Austin P. Judkins is a summer clerk at Boylan Code LLP and a student at Syracuse University College of Law.

Jaime Michelle Cain is a Partner in Boylan Code’s Commercial Lending & Real Estate Group. She concentrates her practice on fair housing consultation and leasing.

To read the published article in the Daily Record, click here.

Municipal Code Amended to Prevent Discrimination on Basis of Income

Columns and blogs abound offering tips and questions individuals should ask to help you choose the right professional to assist you with your investments, retirement, taxes and legal planning. Check any consumer organization’s website or scroll posts on LinkedIn and you will discover options to evaluate your potential new trusted advisor. Here are a few questions that are not generally found on those lists, but probably should be part of your interview:

  • Have you taken care of your own estate planning?
  • If you have done your plan, how long has it been since you reviewed it for fit and accuracy?
  • Do you have an exit strategy (if the advisor is also an owner versus employee)?
  • What will happen to your clients if you should become disabled or die while still working in your practice?
  • What is your “backup” plan? (Ask for the names of the individuals involved.)

Astute clients and potential clients occasionally asked me when I had a solo law firm what guidelines were in place in the event something happened to me. I had an answer and I had a plan because I faced the potential disability question back in 2008. Just a couple months after opening the doors to clients I started having severe joint pain, headaches and odd tingles with random fever and flu-like symptoms. My physician tested me for rheumatoid arthritis and when it came back negative suggested I was suffering anxiety from opening my own practice and trying to cope with family life (my son was barely a year old and our daughter was due to start kindergarten). A few weeks later after I suffered Bell’s palsy in my face my husband rushed me to the hospital where they performed a spinal tap. Suddenly diagnosed with Lyme disease I scrambled to make formal what previously had only been some light banter over drinks with a good friend. As with the business owners and families who come to Boylan Code for planning assistance, unexpected events push long-standing “to do” list items to the forefront. Sadly, I had started a disability insurance application with my advisor when I first opened the firm and had set it aside. Once diagnosed that option to replace lost income during disability was lost to me.

All professionals, not just attorneys, have a professional obligation to their clients to notify them when major changes occur and having an exit strategy in place benefits everyone involved, including the professional, her clients, the business team and employees, vendors and colleagues. Having individuals identified who can step in and assume work flow and business operations will keep matters flowing, can avoid malpractice claims and can provide needed security and liquidity should unforeseen catastrophes or illness strike.

Each profession is governed by its own rules and ethical standards and each profession’s own licensing bureau as well as professional organizations provide assistance to varying degrees with these needs. For example, the New York State Bar Association offers a comprehensive guide, NYSBA Planning Ahead Guide: How to Establish an Advance Exit Plan to Protect Your Clients’ Interests in the Event of Your Disability, Retirement or Death. Attorneys need to pay particular heed when client funds are involved; if the signatory to the client trust account becomes disabled or dies without anyone else having access to those funds a special supreme court proceeding must be instituted for another attorney to gain access to those funds, determine to whom they belong and arrange for their payment or return. Strict rules prohibit the attorney charged with this endeavor from taking any payment for the work involved. Having sadly assisted in one such instance where a trust account was not handled prior to a fellow lawyer’s death I can personally attest to the significant time involved, time that took me away from other clients’ work and required personal trips to the financial institutions involved. Certainly the decedent never intended for this to happen, but by failing to plan it did.

For licensed professions often a different person needs to be named to handle the business versus other personal matters due to client or patient confidentiality and the strict governance of the particular profession. For example, an accountant’s practice cannot be taken over by the surviving spouse who can otherwise be named as Executor to manage personal assets following death. Discussions regarding the proper person to name and what sorts of authority they will need following a death or disaster need to occur and be reviewed regularly. Likewise, any entity agreements need to be reviewed to ensure that transfer restrictions are followed and included as needed in the principal’s estate planning documents.

Professionals owe their clients, colleagues and families the respect and care to provide for a smooth transition in the event of death or disability. Some basic steps to help:

  • Institute a system for transitioning clients, open work, closed files and physical records.
  • Provide a road map for employees and agents who will need to help with the transition.
  • Ensure that estate planning documents provide the needed business powers to avoid your agent or fiduciary having to resort to unnecessary court involvement and expense.
  • Recruit other outside professionals to play their necessary parts.

While preparing this column our summer associate, Austin P. Judkins, researched various financial industry publications and could not find surveys that addressed the specific question of whether financial professionals had actually engaged in preparing their own estate plans. So while we could not find specific industry information for the numbers of bankers, lawyers, accountants, financial advisors and related professionals involved in estate planning who may have neglected to prepare their personal plans, by reviewing general planning statistics we can deduce that approximately one half (1/2) of planning professionals have no plan in place, and for those that do, what does exist may be insufficient. This by no means suggests that those professionals lack professional skill. It is much more probable that they are highly skilled and like the fabled cobbler are so successful at helping others that their own needs fall by the wayside in favor of devoting themselves to their clients.

Our firm regularly works with a cadre of other accounting and investment professionals to help our clients secure their business and personal planning. We now recognize the need to take a closer look at helping those trusted partners with their own transition planning. If you find yourself wondering if your disability strategy or exit strategy could use some attention we would be honored to help you complete the needed steps to ensure peace of mind and care for your team, your clients and your loved ones.

Lisa M. Powers, Esq. is a Partner in the Wealth Protection and Transfer practice group at Boylan Code, LLP.

Austin P. Judkins, a summer clerk at Boylan Code LLP and a student at Syracuse University College of Law, also contributed to this article.

To view the published article, click here.

Special Estate Planning Considerations for Professionals

The 2016 Presidential Election was one of the most contentious in recent memory. Passions ran high on the left and the right. While many hoped Election Night would bring a reprieve, it did not.

Politics has become so divisive that many employers are adopting policies to limit political speech in the workplace. But how far can they go, and what rights do employees have to free speech in the workplace. Here are five key considerations for every employer when it comes to political speech in the workplace.

  1. There is no “free speech” in the workplace. Many people mistakenly believe that the First Amendment guarantees “free speech” in the workplace. That is not true. The First Amendment only applies to governmental action. It does not give an employee a constitutional right to express political thoughts or opinions at work. Employees are free to express their views on their own time, but not at work. With some limited exceptions surrounding employee speech about the terms or conditions of their employment, employers are generally allowed to adopt company policies that limit or prohibit speech in the workplace.
  2. Don’t restrict an employee’s off-duty political activities. The rules regarding off-duty political activities vary widely from state to state. New York’s Labor Law prohibits employment discrimination on the basis of “political activities,” which include a variety of political activities outside of working hours, off of the employer’s premises and without use of the employer’s equipment or other property. Take care that employees are not subject to real or perceived discrimination because of their off-duty political activities.
  3. Promote Inclusion. While it may not be practical to adopt a policy that prohibits all political speech, employers should, at a minimum, adopt policies that prohibit political speech that creates a discriminatory environment for other employees. Employees should be mindful of the fact that strongly held positions on a variety of social issues may, based on how they are shared, be perceived as discriminatory. By their very nature, workplaces bring together people with differing beliefs and values. Make sure your company’s policies promote inclusion.
  4. Campaign fundraising in the workplace is tricky. Company resources should not be used to underwrite fundraising for a federal candidate. Resources made available to a political candidate must be charged to and paid for by the campaign at fair market value. Nevertheless, employees can generally solicit political contributions from their co-workers so long as the contributions are voluntary and made without threat of reprisal or retaliation. Contributions must be from personal funds and should not be reimbursed by the company.
  5. Recognize the difference between political speech and religious conduct. Employers must learn the difference between political speech, which is not protected, and religious expression, which is. Federal and state law prohibit discrimination on the basis of religion. An employer has an obligation to reasonably accommodate an employee’s religious expression, even in the workplace. For example, an employee likely has a right to display a religious object (like a copy of the Bible, Torah, or Koran) in his or her private office. However, a corporate policy limiting political speech in the workplace can be used to stop an employee from advocating for a political candidate even if the employee is doing so because of shared religious values.

While companies justifiably seek to adopt policies that limit political speech in the workplace, perhaps there is room for all of to look inward. On Tuesday, July 4, 2017 we celebrate the 241st anniversary of the signing of the Declaration of Independence. As we examine the implications of our current political climate, perhaps these words from the Declaration’s author, Thomas Jefferson, can give us some needed direction: “I never considered a difference of opinion in politics, in religion, in philosophy, as cause for withdrawing from a friend.”

Terence Robinson is a Partner at Boylan Code LLP, a full service law firm with offices in Canandaigua, Newark, and Rochester. Mr. Robinson can be reached at trobinson@boylancode.com.

To view the published article, click here.

Tired of Politics? What Does the Law Say about Political Speech in the Workplace

“A little hyperbole never hurts. People want to believe that something is the biggest and the greatest and the most spectacular…. I call it truthful hyperbole. It’s an innocent form of exaggeration – and a very effective form of promotion.” – Donald Trump, The Art of the Deal.

One of Trump’s campaign promises is a massive revamp of the tax code. It’s a huge (or is that yuge, as Trump might say?) undertaking that will be the biggest and the greatest and the most spectacular tax code overhaul ever. Maybe that’s a little truthful hyperbole.

The last time the Code was overhauled was in 1986; before that, it was revamped in 1954. The Code undergoes a fairly major overhaul every 30 or so years; we’re due.

Trump’s proposals are certainly some of the most ambitious proposals in recent memory. From a business perspective or a wealthy individual’s perspective, this may be best taxation scheme that the nation has seen since just before the introduction of income tax in 1913. For everyone else, it depends on a number of factors, one of the most significant being whether you believe in supply-side economics (you might know this better as “trickle down” economics or “Reaganomics”). However, I’m not here to discuss politics or debate the merits of different economic schools of thought. We’re here to look at what Trump has proposed. I should point out, this is all speculation and campaign promises should be taken with a block of salt.

Let’s start with the aspect that will affect the greatest number of taxpayers, the proposed tax rates and brackets. Trump would like to cut down the current seven brackets to just three. Right now, the brackets range from 10% for those with income less than $9,275 to 39.6% for with income over $415,050. There is also a 3.8% tax for those with adjusted gross incomes, or net investment income in excess of the statutory threshholds. I should also note that I’m just focusing on the single rates, not head of household or married filing jointly rates (however, a general rule of thumb with Trump’s proposal is the married amount is double the single amount, e.g., the single limit is $37,500, the married is $75,000).

Under Trump’s proposal there would only be three brackets, 12%, 25% and 33%. The 12% bracket would include those with income less than $37,499 and the 33% bracket includes those with income over $112,500; the 25% bracket captures everyone else.

The standard deduction would be increased to $15,000 for individuals, which was a reduction from Trump’s original proposal of a $25,000 standard deduction. Trump also proposes to cap individual itemized deductions at $100,000; a move that won’t affect most Americans (the average itemized deduction for 2011 was $25,230, according to IRS data).

An analysis by the Tax Policy Center found that the bottom 80% of households would see effective tax cuts between 0.6% and 1.7%. Whereas, the top 1% will see a tax reduction of 6.5% and the top 0.1% will see a reduction of 7.3%.

However, there are certain demographics who, because of the removal of head of household as well as the elimination of the $4,000 exemption for each individual in a household, would see their taxes increased. For example, a single parent who earns $75,000 and has two children could see a tax increase of over $2,400. In an attempt to offset the elimination of the $4,000 exemption, Trump proposed allowing parents to deduct child-care expenses for up to four children. The deduction would be capped at the average cost of care in the family’s geographic location. The child care deduction would not apply to individuals earning more than $250,000.

It’s also worth mentioning that Trump would like to repeal the estate tax. The estate tax currently exempts estates worth less than $5.45 million for individuals and $10.9 million for married couples. Currently, around 0.2% of the nation is subject to the estate tax. Further, though not mentioned by Trump, a repeal of the estate tax would almost axiomatically require the repeal of the gift tax due to the way the gift tax and the estate tax work together.

However, the real winners under the proposed tax plan are businesses. Trump would like to see a 15% tax rate on businesses. That would be a 20% cut from the current 35% corporate rate. As you may know, in general there are two ways to tax businesses, double taxation and pass-through. A traditional C corporation has what’s known as “double taxation” wherein the profits of the corporation are taxed at 35% and then any money taken out of the corporation, in the form of dividends, is taxed at a rate up to 20%. In pass-through entities, such as LLCs, partnerships, and S Corporations, profits are only taxed at the owner’s tax rate (i.e., a maximum of 43.4%). Trump’s proposal is to tax all business income at 15%, and that includes pass-through entities. Therefore, a member of an LLC, a partner in a partnership or a shareholder in an S corporation may only have to pay 15% in taxes. In other words, some business owners (including lawyers, accountants and doctors who are owners of their practices) will see their tax rates cut by up to almost two thirds.

Trump’s business tax rate proposal also raises an interesting point, not directly addressed by the proposed plan: Will partners and LLC members be subject to self-employment tax? As explained above, a partner or LLC member will pay taxes at their individual tax rate, however, they also pay the employee and employer share of employment taxes, about 15% (known as “self-employment tax”). Under the current Code, a partner or member could pay a total of 58.7% if he or she were in the highest tax bracket and paid the self-employment tax. If Trump’s plan converts partnership and LLC profit into “business income” that may lead to the elimination of the employment tax for partnership and LLC owners, which would effectively drop the tax rate by 75% for those partners and members in the highest tax brackets.

While all of that sounds great for business owners, there’s always a catch. Under Trump’s plan, businesses would lose most deductions, including interest on debt deductions. But, in a move that will please most businesses, Trump proposed that, instead of depreciating assets over the life of the asset, the entire expense of an asset could be deducted up-front.

Additionally, multinational companies will be celebrating a potential tax holiday in which a 10% deemed repatriation tax will be imposed on profits held overseas. That might not seem great on the surface, but that allows US companies to bring back those profits held overseas, valued around $2.5 trillion, with a 10% tax instead of the current 35%. Moreover, the 10% tax would be payable over 10 years. Trump claims that this would lead to mountains of money flowing back into the US, presumably to be spent by businesses to hire people and expand, instead of substantial shareholder dividends and bonuses to executives. But, as stated earlier, there’s always a catch. With this proposal, Trump would seek to tax foreign subsidiaries on their profits every year.

Trump’s proposal is that by lowering taxes for most Americans and further reducing taxes for the top 1% and drastically reducing the corporate tax rate, the entire nation will benefit. We can’t know, right now, whether his proposals will be enacted, and, if they are, what effect they will have on Americans and the economy, both domestic and global.

No matter your political beliefs, economic philosophies or personal feelings, Tom Hanks recently summed up a Trump presidency in the best light possible, “I hope the president-elect does such a great job that I vote for his re-election in four years.” That is a sentiment every American can support.

Can Trump’s Tax Plan Make America Great Again?