BizLawBuz …. The Power of Know

Many employers hire students as interns during the summer months and are perhaps questioning how those interns should be paid to ensure the employer’s compliance with the Fair Labor Standards Act (FLSA). If your interns are “employees,” FLSA applies, and the interns must be paid at least minimum wage. If the interns can be categorized as a “trainee,” however, they may be exempt from FLSA.

For an intern to qualify as a trainee, the intern’s position must meet the following criteria:

1) The training, even though it includes actual operations at the facilities of the employer, is similar to that which would be given in a vocational school;
2) The training is for the benefit of the trainee;
3) The trainee does not displace regular employees and works under close observation;
4) The employer providing the training derives no immediate advantage from the activities of the trainee, and, on occasion, the employer’s operations may actually be impeded;
5) The trainee is not necessary entitled to a job at the completion of the training period; and
6) The employer and the trainee understand that the trainee is not entitled to wages for the time spent in training.

If interns fail to meet any of the above criteria, they should be paid as employees, with at least minimum wage and overtime compensation when earned. Note that class credit is not considered wages and should not be substituted for wages.

Julie H. Pfitzenmaier

Under Michigan law, when homeowners are behind in their mortgage (in default), the mortgage lender basically has two options insofar as foreclosure is concerned. By law, all mortgages in the State of Michigan can be foreclosed by judicial action. Foreclosure by judicial action is a court proceeding that is both time consuming and expensive. As a result, foreclosure by judicial action of mortgages involving residential property is rare. The other option is foreclosure by advertisement. Foreclosure by advertisement does not involve the courts, is cheaper and quicker (generally, six weeks from the beginning of the process to the sheriff’s sale of the property, as opposed to upwards of six months for a judicial foreclosure.) Foreclosure by advertisement is only available to the mortgage lender if allowed by the terms of the mortgage. Provisions allowing foreclosure by advertisement are found in most, if not all, mortgages for residential property.

On May 20, 2009, Governor Granholm signed into law a series of three bills that amend Michigan law pertaining to foreclosures by advertisement. These new laws take effect on July 5, 2009. What these new laws seek to do is slow down the process of foreclosure by advertisement and provide the opportunity for negotiation and modification of the terms of the mortgage, all with a view to avoiding the foreclosure and allowing homeowners to remain in their homes. Under these new laws, a lender wishing to foreclose a mortgage by advertisement must first provide the homeowner with written notice designating a contact person who has authority on behalf of the lender to modify the mortgage. The lender must also provide a list of state approved “housing counselors” that homeowners may request become involved on their behalf to help negotiate a modification of the mortgage. These laws go on to specify a criteria to be applied in determining whether or not the homeowner qualifies for modification of the mortgage, allow for court involvement, and impose notice requirements and time parameters within which all of this is to take place. Stated simply, these new laws contain detailed provisions affording new and additional rights to the homeowner facing foreclosure by advertisement and imposing new and additional obligations on the mortgage lender.

From the standpoint of the mortgage lender, foreclosure by advertisement will become much more complicated on July 5, 2009. But, for the homeowner who pays close attention to the notices received and takes advantage of the opportunity for re-negotiation and modification of the mortgage, these laws greatly enhance the possibility that foreclosure may be avoided altogether.

Duane L. Reynolds

Tool and die makers – and the manufacturers who use their products – need to be familiar with special lien rights that can be created and enforced under the Michigan Special Tools Lien Act. The Act was passed by the Michigan legislature to give toolmakers greater protection than the traditional mechanic’s lien alone provides.

The Act sets forth procedures allowing toolmakers to create a lien on any tool they fabricate or improve. Among other things, toolmakers need to be marking the tool itself to reflect the lien and also making sure to provide notice of the lien, including UCC Financing Statements, to both their customers and the end-users of the tool. Additionally, the Act sets forth certain procedures by which toolmakers can claim possession of the tool, which offers considerable leverage when negotiating unpaid balances for work performed.

Protections under the Act are not automatic. Rather, toolmakers must make sure they comply with certain statutory requirements to avail themselves of the rights available to them. Similarly, those dealing with toolmakers need to make sure they understand the exposure they face by risk of the provisions of the Act. You can find the Act at www.legislative.mi.gov (MCL 570.541-.571).

Feel free to contact Wright Penning & Beamer with questions about how it works or about how your business may be impacted.

Dirk A. Beamer

When screening job applicants, employers routinely inquire about an applicant’s criminal record. While such inquiries are permissible, an across the board policy against hiring people with criminal convictions may not be.

Data shows that certain minority groups are disproportionately represented among the ranks of people with criminal convictions. Accordingly, a blanket policy against hiring people with convictions is statistically more likely to discourage hiring among those minority groups. Because of the “disparate impact” these policies can have on minority groups, they are coming under fire from the United States Equal Employment Opportunity Commission (“EEOC”).

Speaking at a recent meeting of the Labor and Employment Law Section of the State Bar of Michigan, the regional field director for the Detroit office of the EEOC announced plans to challenge employers with blanket policies against hiring applicants with criminal records. The Detroit office of the EEOC has already commenced litigation in federal court in Grand Rapids against a retail chain that follows such a policy.

Employers will be wise to review their own policies and hiring practices. Decisions based on criminal history should be made on a case-by-case basis and only where there is a rational, specific correlation between a criminal conviction and the applicant’s ability to perform the job at issue. For example, someone convicted of embezzling funds can safely be ruled out as an applicant for a cashier’s position. Someone with a fifteen-year-old conviction for drunk driving cannot be as easily eliminated from consideration for that same cashier’s position.

One option for passing the EEOC’s scrutiny is to make a job offer provisional pending a criminal background check. By delaying the inquiry into the criminal history until after an applicant has been found otherwise qualified for the job, the employer minimizes the risk of being found to have used criminal history as an excuse for eliminating qualified applicants based on race.