BizLawBuz …. The Power of Know

A few days ago I was talking to a friend whose business is struggling badly. I knew that he had been talking to a new, potential customer and that the work he hoped to get would pretty much determine whether or not his company would survive. Turns out he was about to sign a contract. Money for him is tight, so, in light of our longstanding relationship, I offered to take a few minutes to look at the contract for him. In doing so I was struck by a number of things that concerned me, not the least of which was a clause that would prohibit him from rendering similar services to any other customer in that particular industry segment. Problem is, that industry segment makes up the bulk of my friend’s business.

I pointed out the ramifications of this clause in an email, assuming that this was something that his new, potential customer was insisting upon and that it was probably not negotiable. That email prompted a quick return phone call. Turns out that the contract was prepared not by the potential customer, but by my friend. The clause was merely part of a contract template he had found on the internet; he had no idea that it was there. Once I pointed it out to him he agreed that he wasn’t all that clear about what it meant or its implications. He does now. Since the new work would not be sufficient in and of itself to sustain his business, he stood to lose everything. At a minimum, he would have certainly found himself embroiled in costly litigation.

My point? There are a whole lot of people out there making a whole lot of money trying to convince you that all you need is a “one-size-fits-all”, generic template for every conceivable legal situation, and that you can easily find them on the internet. After all “who needs a lawyer” anyway? I’ve seen situations like this many times in my career and I have seen a lot of people hurt. In every situation the fees I would have charged had I gotten involved at the outset pale in comparison to the fees that were later incurred in an effort to try to straighten things out after the damage was done. The timing was fortuitous on this one and I was able to help keep a friend from potentially losing his business. It’s been a good day.

Duane L. Reynolds

Everywhere I look, I run into lists. We seem to be obsessed with them. I’ve run across the following lists just today, and it’s only 3:00 in the afternoon:

-Top ten things to make out of Lego;

-The 100 best companies;

-Seven ways to improve the results of sales calls; and

-Twenty-five people to blame for our economic woes.

I’m sure that you can readily recall any number of lists that you’ve recently seen. How about the best-dressed stars at the Oscars, or maybe the ten snowiest winters in Detroit?

Not to be outdone by popular culture, the Internal Revenue Service has jumped into the list-making game. One of the IRS lists that I thought was particularly timely and helpful is reprinted below. A lot has been published about identity theft in recent years, but this list is one of the few pieces I’ve seen that addresses what you should do AFTER a problem arises. You’ll find this list and a host of other interesting tax-related topics at http://www.irs.gov/newsroom/content/0,,id=106439,00.html.

Ten Things the IRS Wants You to Know About Identity Theft

IRS TAX TIP 2009-11

1. If you receive a letter or notice from the IRS which leads you to believe someone may have fraudulently used your Social Security Number, respond immediately to the name and address or phone number printed on the IRS notice.

2. If you receive a letter from the IRS that indicates more than one tax return was filed for you, this may be a sign that your SSN was used fraudulently.

3. Another sign that you may be the target of identity theft is an IRS letter indicating you received wages from an employer unknown to you.

4. The IRS has a department which deals specifically with identity theft issues. The IRS Identity Protection Specialized Unit is available if you have been in contact with the IRS about an identity theft issue and have not achieved a resolution.

5. You can contact the IRS Identity Protection Specialized Unit by calling the Identity Theft Hotline at 800-908-4490 Monday through Friday from 8:00 am to 8:00 pm local time (Alaska and Hawaii follow Pacific Standard Time).

6. The IRS Identity Protection Specialized Unit is also available if you believe your identity may be at risk of being stolen due to a lost or stolen purse or wallet or due to questionable activity on your credit card or your credit report.

7. The IRS never initiates communication with taxpayers about their tax account through emails. If you receive an e-mail or find a Web site you think is pretending to be the IRS, forward the e-mail or Web site URL to the IRS at phishing@irs.gov.

8. The IRS has many more resources available to help inform taxpayers about identity theft on the IRS Web site at IRS.gov. On IRS.gov you can access information on how to report scams and bogus IRS Web sites. You can also visit the IRS Identity Theft Resource Page, which you can find by typing Identity Theft Resource Page in the search box on the IRS.gov home page.

9. The Federal Trade Commission is also available to assist taxpayers with identity theft issues. You can reach them at 877-ID-THEFT (877-438-4338).

10. Visit OnGuardOnline.gov for protection tips from the federal government and the technology industry.

Lee Flaherty

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Our good friends at American Industrial forwarded some practical advice they had received online about easy steps you can take to minimize the risk of credit and identity theft. The advice is certainly well worth passing along, so here are some practical do’s and don’ts:

1. Do not sign the back of your credit cards. Instead, put “Photo ID Required.”

2. When you are writing checks to pay on your credit card accounts, DO NOT put the complete account number on the “for” line. Instead, just put the last four numbers.

3. Put your work phone number on your checks instead of your home phone. If you have a P.O. Box, use that instead of your home address. If you do not have a P.O. Box, use your work address. Never have your Social Security number printed on your checks.

4. Place the contents of your wallet on a photocopy machine. Copy both sides of each license, credit card, etc. You will know what you had in your wallet and all of the account numbers and phone numbers to call and cancel. Keep the photocopy in a safe place.

5. We have been told we should cancel our credit cards immediately. But the key is having the toll free numbers and your card numbers handy so you know whom to call. Keep those where you can find them.

6. File a police report immediately in the jurisdiction where your credit cards, etc., were stolen. This proves to credit providers that you were diligent, and this is the first step toward an investigation (if there ever is one).

7. If your wallet is stolen, call the three national credit reporting organizations immediately to place a fraud alert on your name and also call the Social Security fraud line number:

Equifax: 1-800-525-6285
Experian (formerly TRW): 1-888-397-3742
Trans Union: 1-800-680-7289
Social Security Administration (fraud line): 1-800-269-0271

The alert means any company that checks your credit knows your information was stolen, and they have to contact you by phone to authorize new credit.

Dirk A. Beamer

In November of 2008, Michigan voters approved Proposition 1 to permit the use of marijuana for medical treatment by properly registered patients. Cautious employers need to be proactive to ensure that workers do not misunderstand the new Act as license to bring marijuana into the workplace.

The Act states specifically that Michigan employers are not required to allow employees to use marijuana in the workplace or to work under the influence of marijuana. However, it also prohibits employers from taking adverse action against an employee who is properly registered as a legal medical user just because she in fact uses marijuana.

Employers who do not have an explicit, written policy prohibiting the use of drugs in the workplace, and also prohibiting employees from reporting to work under the influence of controlled substances, should put such policies in place immediately. For employers who already have such policies, experts suggest that the policies be republished and brought to the workforce’s attention to ensure a proper understanding of the prohibitions notwithstanding the new medical marijuana act. Additionally, employers need to use caution when an employee is found to have, or is suspected to have, marijuana in his possession at work if he shows no sign of being under the influence of the drug.

The Michigan Department of Community Health must promulgate rules under the Act by April 4, 2009. Additional information about the Act and the proposed rules can be found at www.michigan.gov/mmp.

Dirk A. Beamer

Of the numerous issues covered under the recently enacted federal stimulus package, employers and employees alike should take note of the provisions offering subsidies for COBRA benefits for eligible workers.

COBRA is an acronym for the Consolidated Omnibus Budget Reconciliation Act. It is a piece of federal legislation from the 1980s. Under COBRA, most terminated workers have been able to continue participation in employer provided health care plans for up to 18 months. However, the employee pays the entire cost of continued coverage.

Under the American Recovery and Reinvestment Act of 2009 passed last week, eligible workers can receive a 65% subsidy toward their COBRA premium for up to 9 months. The employers or plans who normally administer COBRA benefits can receive a credit against payroll taxes to offset the cost of the subsidy.

Who is eligible? Workers who lost their jobs involuntarily between September 1, 2008 and December 31, 2009. They must have annual incomes less than $125,000 for individuals or less than $250,000 for couples.

What must employers do? From now on, COBRA notices must specifically reference the subsidy, which is effective for premiums starting March 1. Also, a special sixty day election period – starting February 17 — must be offered to otherwise eligible individuals who previously declined COBRA coverage. Model notices are supposed to be available from the Department of Labor in thirty days.

Experts caution that all of the rules and implications surrounding this provision still are not clear. Employers need to be attentive and cautious. Employees should seek guidance before making election decisions.

Dirk A. Beamer

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Know Your Business. Grow Your Business. Protect Your Business

Scarcely a day (or, even an hour for that matter) goes by that we don’t hear of one new thing or another that is included in the recently passed stimulus package. Unfortunately, the law is so new, lengthy and complex, that it’s not all that easy to get a complete copy of it (insure that your printer has plenty of paper and toner), let alone read and figure it out. While we’re doing what we can to get a handle on this in order to assess the impact of its provisions on our clients, I can’t help but smile at some of the things I am seeing.

For example, I am the proud owner of a 2008 Harley-Davidson Electra Glide Ultra Classic. Last year I logged nearly 7,000 miles which included a trip with several friends from my home in southeastern lower Michigan to the Canadian Rockies and back. Imagine my surprise when I saw the above headline of a February 13, 2009 posting by the Milwaukee Wisconsin Journal Sentinel. I also found a similar posting on the Cycle News website.

Buried in section 1008 of the legislation is a provision allowing a deduction against 2009 federal income taxes for state sales and excise taxes for new vehicles purchased between November 12, 2008 and December 31, 2009. Although originally intended to apply only to the purchase of new cars and light-duty trucks, the definition of “qualified vehicles” was extended to include motorcycles. It is anticipated that this expansion will benefit yet another industry that has been so adversely impacted by the economic downturn.

So, in addition to the fact that you can have a great time and save a lot money on gas by riding a motorcycle, you can now help to stimulate the economy and save on your taxes to boot! What a country! Enjoy. And remember: “keep the shiny side up.”

Duane L. Reynolds

Know Your Business, Grow Your Business, Protect Your Business
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From a blog post by Rick Barrett of the Journal Sentinal:

Stimulus bill includes tax credit for motorcycle purchases

By Rick Barrett of the Journal Sentinel

Posted: Feb. 13, 2009

A provision in the economic stimulus package could help motorcycle manufacturers, including Harley-Davidson Inc.

It’s a tax credit for purchasers of new cars, light-duty trucks and motorcycles.

During Senate consideration of the stimulus package, an amendment was approved to provide purchasers of new cars and light-duty trucks a tax credit allowing a deduction of state sales or excise taxes for new vehicles purchased between Nov. 12, 2008, and Dec. 31, 2009.

The expansion of the tax credit to motorcycles could make it easier for consumers to purchase bikes at a time when reduced sales have forced layoffs at Harley-Davidson, one of the Milwaukee area’s largest employers, according to legislators.

“Like other struggling businesses, sluggish sales have led to job losses in the motorcycle industry and the dealerships that depend on it. We should do all we can to help Harley-Davidson weather this poor economy so they can boost sales and retain jobs,” Sen. Herb Kohl (D-Wis.) said in a statement issued Friday.

The recent layoffs at Harley were a painful sign of how the economic downturn has affected Wisconsin, added Sen. Russ Feingold (D-Wis.).

“This effort to make it easier for consumers to purchase motorcycles as well as cars should help lead to more Harley sales and more Wisconsin jobs,” he said in the statement.

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We welcome your comments about the 2009 Stimulus Package.

Employers with a clear and consistent pattern of certain benefits or perks of employment can find themselves stuck with a contractual obligation to maintain those perks. In a recent case from the Michigan Court of Appeals, the Court confirmed an arbitrator’s ruling that a police department had breached a contractual obligation to provide a new officer a “take-home” vehicle since the department had a well-established practice of providing such a vehicle to all other officers.

The Court found that since a certain practice had become a part of the employer’s structure, the employer could not unilaterally change the practice. This particular case arose out of a Collective Bargaining Agreement between the union and the police department, which probably strengthened the police officer’s claim. Still, it serves as a good reminder that employers should not allow informal or unintended perks or benefits to become the norm unless the employer is intending to adopt that norm as its actual practice. It is also a reminder that a course of conduct or pattern that is inconsistent with the written polices of the workplace will often be found to trump those written polices when challenged.

Dirk Beamer
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Increasingly, workers and lawyers around the country are bringing lawsuits challenging the workers’ classification as independent contractors instead of employees. Often, companies look for opportunities to hire independent contractors instead of employees in order to avoid payroll taxes and employee benefit packages. The problem surfaces when a decision is driven solely by the desire to save money and not by an objective analysis of the job function.

Ultimately, the question of whether someone is an employee or an independent contractor must be determined by a multi-part analysis of the terms and conditions of the relationship and of the level of autonomy the worker has in performing her duties. The mere fact that the company classified someone as an independent contractor, or even a written agreement between the parties saying that the worker will be an independent contractor, will not be dispositive of the question.

Two pieces of legislation (the Independent Contractor Proper Classification Act and the Employee Misclassification Prevention Act) that stalled in last year’s Congress can be expected to resurface this year. Collectively, they would increase the Internal Revenue Services’ options for challenging the independent contractor designations and could result in greater liability for companies that misclassify workers.

Dirk Beamer

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Sometimes, an otherwise legitimate disciplinary action can be the basis for a claim of discrimination if the employer has not taken steps to administer the discipline comparably in similar situations. If Bob reported to work 10 minutes late and was given a verbal warning, while Mary also reported to work 10 minutes late but was sent home without pay, Mary may decide to pursue – and be successful in pursuing – a claim for sex discrimination.

In a recent decision out of the federal 6th Circuit Court of Appeals in Cincinnati, Madden v. Chattanooga City Wide Services Department, the Court upheld a finding of race discrimination where a supervisor reported a black employee for setting off firecrackers at work even though the same supervisor never reported similar conduct by white employees. The conduct itself – setting off firecrackers at the workplace – was a plain violation of workplace safety rules and was a legitimate basis for the company’s decision to terminate the employee. The problem was, management never bothered to determine whether the supervisor had handled similar situations the same way.

It is imperative that management properly educate anyone in a supervisory capacity concerning the need to treat all workers equally. It is equally important for management to monitor and investigate disciplinary decisions by supervisors to ensure that those supervisors are acting properly.

Dirk Beamer
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Last January, we reported on the new I-9 form that employers must complete within three days of hiring a new employee. The new form updates the criteria for acceptable documentation that can be used to prove that an employee is lawfully entering the workforce.

The new forms must be used for any new hires beginning February 2, 2009. If you have not already obtained updated forms, the time to do so is now. Sample forms are available at www.uscis.gov/files/formi-9.pdf.