Entries Tagged as 'Employment Law'

Social Networking Unforeseen Risks for Your Company

Talking Business on Social Networking Sites

The Dos and Don'ts of Social Networking and Your CompanyWhether you personally post or tweet, chances are good your company’s employees participate actively on any number of social networking websites. According to the Pew Research Center, adult use of such sites accounted for almost fifty percent of the internet activity in America in 2009. Aside from its personal and entertainment value, social networking can be a valuable tool for fostering successful business relationships. The blurry line between personal and business use, however, can create unforeseen risks for your company, including the risk that posted comments by your employees will be treated as official statements from the company.

Consider the case of an overzealous sales representative who proudly brags about the company’s products online (so far, so good) but in the process decides to talk trash about a competitor. Does the competitor now have a libel or slander case against your company? Or how about a company supervisor who offers the following recommendation on LinkedIn for a subordinate who is also pursuing an approved sideline business: “I have worked with Sally for five years and have always found her to be hard working and high performing.” The Dos and Don'ts of Social Networking and Your CompanyIf the company later lets Sally go for poor performance, can the supervisor’s post be used as evidence that Sally’s performance was fine and that she is being discriminated against because of gender? In both instances, the answer is probably “yes.”

Employers must be careful in monitoring or regulating employees’ personal, online activity too closely. If you track employee use regularly, you are bound to learn information that you would have preferred not to know and that may actually limit your ability to supervise and discipline the employee. Nonetheless, when it comes to employee comments about workplace activities or relationships, serious thought should be given to updating the company’s handbook or policy manual to provide some basic “dos and don’ts” governing this category of online statements.

Questions? Give me a call … or just post them here on our blog.

Dan A. Penning

Do You Qualify for Small Business Health Care Tax Credit?

SmallThe Patient Protection and Affordable Care Act was enacted in March of 2010. One of the first provisions to go into effect from the Act is the small business health care tax credit. The purpose of the credit is to encourage small businesses to offer health insurance coverage to their employees for the first time or maintain coverage they have, and to help small businesses that employ primarily low- to moderate-income employees.

The IRS touts “three simple steps,” which can be found at http://www.irs.gov/pub/irs-utl/3_simple_steps.pdf, to determine if you qualify for credit in the 2010 tax year:

  1. Determine your total number of employees (not including owners or family members),
  2. Calculate the average annual wages of employees (not including owners or family members), and
  3. You pay at least half the insurance premium for employees at the single coverage rate.

PatientIf for 2010, your total number of employees is less than 25, the average annual wages is less than $50,000, and you satisfy #3, the credit is likely available to you. The maximum credit, which goes to employers with 10 or fewer full-time equivalent employees and annual average wages of $25,000 or less, is 35 percent of premiums paid by eligible small business and 25 percent of premiums paid by eligible tax-exempt organizations.

Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return. For tax-exempt organizations, the IRS will issue further instructions on how to claim the credit.

Dan A. Penning

Stealing the Help and Kissing Your Sister

Paying your competitor’s attorney fees in Non-Compete Cases

Non compete agreementsAfter seventeen years practicing law, I find that most business clients appreciate the services I have to offer and are willing to pay a fair fee for them. But I have yet to meet a client who feels at all inclined to pay the legal bill of a competitor who has just sued. That’s like being thirteen and kissing your sister. Yet when corporations sue each other over the alleged theft of a valuable employee, the dispute can quickly become a fight over attorney fees.

Any time you hire a competitor’s current or former employee (or independent contractor), you face the risk of a lawsuit from the competitor alleging improper interference with a contract, or some other form of unfair competition. If the employee had a written agreement not to compete with the former employer, the risk of such a suit is all the greater. Risk assessment needs to be part of the hiring decision so you can decide whether the potential employee’s attributes justify the risk. In performing that assessment, you have to consider the possibility of paying not only damages but also the cost of your own – and even your competitor’s – legal fees.

Judge's injunction to stop alleged unfair competitionIf the competitor goes to the trouble of suing you, it will probably bring every plausible claim available against you. In non-compete cases, this usually involves a claim that the employee and you have conspired to steal the competitor’s trade secrets and proprietary information. In most lawsuits between business competitors, each side pays its own legal expenses – win, lose or draw. But under Michigan’s version of the Uniform Trade Secrets Act, a prevailing plaintiff can recover attorney fees if it shows that the defendant willfully and maliciously stole a trade secret.

Just as I have never met a client anxious to pay a competitor’s lawyer, I have also never met a client (whether a corporation or an individual business person) who believes he acted maliciously in his business dealings. Unfortunately, there is scant case law in Michigan clearly defining willful and malicious conduct under the Uniform Trade Secrets Act. As a result, in virtually every non-compete case brought naming you as a defendant, you will face the argument – and the risk – that you did act maliciously.

Most non-compete cases start with a request for an immediate injunction to stop the alleged unfair competition. This requires the judge to conduct a hearing that resembles a mini-trial at the outset of the lawsuit. The judge’s decision whether or not to grant the injunction will be widely viewed as a barometer of the ultimate merits of the case. Consequently, many cases settle once the judge grants or denies the injunction requested, if not before. In the mean time, the parties – and the suing party in particular – will have incurred substantial legal bills in a short amount of time. (In one case I defended, the opponent racked up about sixty thousand dollars in fees in the one month between filing and settling the case.) With the judge’s decision on the injunction having effectively resolved the merits of the claim, the parties are left to fight over who should foot the bill for having brought the matter to court.

Minimize risk of paying competitor's attorney feesObviously, the judge’s decision on the injunction will either strengthen or weaken the suing party’s claim that you acted maliciously. Either way, both sides will need to consider carefully how much more legal expense they are willing to incur solely to fight over who should pay the fees to date. If the case appears ready for settlement even before the judge rules on the request for an injunction, you still may face a fight over attorney fees. I have seen plaintiffs with no real damages become all the more insistent that they recover attorney fees as a matter of principle to ensure that the perceived misconduct does not go unpunished. If you are defending, do you buckle and pay some portion of the other side’s fees, or do you hold ground as a matter of principle? If you hold fast, you may end up paying far more money in the long run, albeit to your own attorney rather than to your competitor’s. As a colleague once told me, “It is perfectly appropriate to stand on principle, once you have acknowledged that principle is expensive.”

How do you avoid the distasteful dilemma of paying some portion of a competitor’s attorney fees? While no answer is full proof, there are steps you can take to minimize the risk:

  1. Fully assess the risk going in. When interviewing potential employees, have them confirm in writing as part of the interview process whether they have obligations under an existing non-compete agreement. If they answer “no,” it will be harder for a competitor to show you acted willfully and maliciously in the hiring process. If the answer is “yes,” then you know you face a greater threat of a lawsuit and, consequently, may not want to hire the individual. (One caveat: if you do hire the individual notwithstanding his written admission of an existing non-compete, you may strengthen the argument that you have acted with malicious motives.)
  2. Avoid trade secrets. If you do hire a competitor’s current or former employee, be extremely vigilant in instructing the new employee and all who work with him that you will not condone any using or sharing of the competitor’s proprietary information and trade secrets. Monitor the situation for compliance. This will make it harder for your competitor to seek fees under the Uniform Fair Trade Practices Act.
  3. Assess your risks again. If you do find yourself in a lawsuit, make sure your initial assessment of your potential liability includes a proper allowance for attorney fees. It rarely makes sense to hold fast to an unreasonably low settlement position, only to spend far more in defense than what you could have resolved the case for early on.

By their nature, non-compete cases force the parties to spend considerable legal fees early in the process, often before either side has a solid understanding of the damages suffered. Many times, the actual damages a suing competitor is able to prove will be far smaller than the fees incurred. Given the attorney fee award provisions under the Uniform Trade Secrets Act, you could find yourself fighting to avoid a fee award against you, even in a case where you have caused no measurable harm to your competitor. Try your best to understand your risks before making the hire. That doesn’t mean you won’t make the hire if the employee is worth the risk. After all, most thirteen year olds would kiss their sister — for the right price.

Dirk A. Beamer

Subsidy for COBRA Premiums Extended

“Here is a timely reminder about COBRA benefits from our friend Kirk Radford at Taligence – HR Consulting & Solutions:”

President Obama and Congress have once again extended the COBRA subsidy. Approved yesterday, the Continuing Extension Act of 2010 provides a 65% subsidy of COBRA premiums for individuals who lose group health plan coverage because of an involuntary termination between March 1 and May 31, 2010. The subsidy is available for up to 15 months.

The extension also applies to those who initially lost group health plan coverage because of a reduction in hours and then experienced a termination of employment between March 1 and May 31 of this year.

NOTICES MAY BE REQUIRED
Because the last COBRA subsidy extension already expired, individuals who experienced an involuntary termination since March 31, 2010 and have already received a COBRA election notice will need to receive an updated notice explaining their rights under the extension. These individuals are entitled to a special election period, even if they previously declined COBRA coverage. The updated notices must be sent by June 15, 2010.

We expect the Department of Labor to issue additional guidance and an updated election form(s) soon.

Kirk P. Radford
Taligence - HR Consulting & Solutions
www.taligence-hr.com

Dan A. Penning

“Reinvented” Benefits

Reinvented Benefit Help for a Slow EconomyOver the last several years, Michigan has experienced extraordinary job loss. One fruit of those job losses has been an unusual number of business start-ups. All over the state, laid off workers have “reinvented” themselves, sometimes going back to school to pursue a different or more advanced degree, and sometimes going into business for themselves doing either the kind of work they have always done or something entirely new.

Online Resources
The federal government continues to develop online resources for the benefit of business owners. Among the recent resources posted by the Internal Revenue Service is a virtual small-business tax workshop that you can access at http://www.tax.gov/virtualworkshop. The virtual workshop consists of a series of nine videos covering a number of topics of interest to small business owners, particularly those who are just getting started. Lessons cover topics such as how to set up and run your business, how to file and pay your taxes using your computer, how to set up a home office or a retirement plan and how to manage payroll.

Taking Advantage of SBA Loan Programs
The U.S. Small Business Administration also has a number of online resources for small business owners. Several videos and podcasts can be accessed at http://www.sba.gov/training. Among the topics covered by the SBA are how to develop a business plan, how to survive in a down economy, and how to take advantage of SBA loan programs and federal government contracting opportunities.

The Need for Tax or Legal Counsel
These online tools don’t replace the need for tax or legal counsel, but they can help you make better and more efficient use of both your time and our office, which in turn can save you money. If you are considering a new business venture or you need our assistance with a legal matter affecting your ongoing business, please contact any of the attorneys at Wright Penning & Beamer. We would be pleased to help you!

Dan A. Penning

Use Caution When Reducing Work Hours for Salaried Employees

Time Clock for Reducing Work Hours of Salaried Employees on Suttons Bay LawIn response to challenging economic times, a number of employers have announced reduced work hours or “furlough” days. Generally speaking, reducing work hours for hourly employees is a safe and fair way to help control labor costs in difficult times. When dealing with salaried employees who are exempt from state and federal overtime pay requirements, the rules become more complicated.

To qualify an employee as “exempt” from overtime pay, an employer must, among other things, pay the employee on a salary basis. This means that exempt employees are paid a predetermined amount for any given workweek regardless of variations in the actual amount of time spent working in that workweek. Just as the employee will not be given extra pay for working more than 40 hours in a week, the employee will not be docked pay for working less than 40 hours in a week. The one exception is that an employer may choose not to pay any salary for a given week so long as the employee truly did no work that entire week.

When reducing work hours, requiring salaried exempt employees to work one less day per week would not in and of itself permit the employer to reduce the employee’s weekly salary by one-fifth. It is safer to require salaried employees to take mandatory unpaid vacations in increments of one full week. The employer must give strict instructions that the employee not perform work (such as handling emails or voice messages) during that week.

Wall clock for reducing hours for salaried employees on SuttonsBayLawAnother alternate would be for the employer to implement an actual salary reduction to correspond with anticipated reductions in hours worked. This is permissible so long as the reduction takes effect for a consistent and foreseeable period of time. The employer may not manipulate the salary from week to week in order to correspond with fluctuating work hours.

The bottom line is that employers should not require salaried exempt employees to take unpaid time off in less than one week increments. If you must make salary reductions, you can do so, but those reductions cannot fluctuate from week to week.

Finally, keep in mind that some employee benefit plans require the employee (whether hourly or salaried) to maintain a minimum number of hours worked per week. Employers must be careful not to disqualify an employee from benefit eligibility inadvertently by reducing the employee’s hours.

Wage and hour laws can be confusing. Do not hesitate to contact a Wright Penning & Beamer attorney if you need additional information or clarification.

Dan A. Penning

COBRA Subsidy Extension Means More Work for Employers

President ObamaIn December of 2009, Congress and the President approved an extension and expansion of a COBRA premium subsidy law that was due to expire on December 31, 2009. The program now runs through February 28, 2010, rather than December 31, 2009, and the subsidy period is expanded from nine to 15 months. Additionally, there is no requirement that COBRA coverage begin by February 28, 2010, only that the COBRA qualifying event (involuntary termination of employment) occurs by February 28, 2010, and that the individual is eligible for COBRA coverage.

With this extension come new compliance obligations for employers. For example, employers must comply with new notice requirements regarding the extension that must be met quickly. As the United States Department of Labor outlines in its FAQs, plan administrators must provide, as part of the COBRA election notice materials, a General Notice to all qualified beneficiaries, not just covered employees, who experience a qualifying event at any time from September 1, 2008 through February 28, 2010, regardless of the type of qualifying event. For qualifying events occurring after the December 19, 2009 date of enactment, this notice must be provided within the normal timeframe for providing a COBRA election notice. Some beneficiaries will be entitled to multiple notices.

Picture of the United States White HouseEmployers will also need to calculate any overpayments for COBRA beneficiaries who may have paid their full premiums upon receiving notice that their eligibility for the pre-extension subsidy ran out. Upon calculation of the overpayments, employers will have to decide either to issue refund checks to the beneficiaries or to offset future COBRA premium payments by the amount of the overpayment.

For more information on the notice requirements, as well as additional facts regarding the COBRA subsidy extension in general, please visit:
http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionEE.html and
http://www.dol.gov/ebsa/newsroom/fscobrapremiumreduction.html.

As always, feel free to call the attorneys at Wright Penning & Beamer as well.

Dan A. Penning

Wright Penning & Beamer Attorneys Named “Top Lawyers” by DBusiness

I’m pleased to announce that one of Michigan’s premier business journals, DBUSINESS, recently announced its 2010 “Top Lawyers” in metropolitan Detroit - and three of the principals with Wright Penning & Beamer made the list.

DBUSINESS compiles its list as a resource and reference guide for its readers. Selection criteria include:

  • legal knowledge
  • analytical capabilities
  • judgment
  • communication ability, and,
  • legal experience.

The list was published in the journal’s November/December 2009 edition.

According to the publication, selected lawyers “possess the highest professional ability and ethical standards.”

Dirk Beamer, Lee Flaherty and I were selected this year. Beamer for his expertise in business and commercial litigation; Flaherty for her work with non-profits and charitable organizations, and I was recognized for business and estate planning.

As a founding shareholder of the firm I’ve focused my practice areas primarily in planning for business entities including family businesses, estate planning for business owners, individuals, families with special needs children, and succession planning for family cottages and farms. Through these practice areas our firm has become a leading resource for individual and business clients.

Beamer oversees our firm’s diverse litigation practice, focusing primarily on business and commercial litigation. He spearheads the firm’s efforts in insurance law, unfair competition, trademark infringement, employment matters and contract disputes. Dirk has litigated in state and federal courts across the country. He also counsels business owners and managers concerning employment practices and management.

In addition to her work with non-profits, Lee Flaherty is well versed in real estate, business law, estate planning and probate. Lee’s business expertise encompasses the support of ongoing businesses, business purchases and sales, and representation in commercial real estate transactions. Her estate planning practice focuses on the preparation of a wide variety of trusts and other documents to assist clients in avoiding probate, preserving assets and minimizing taxes.

I take pride in my colleagues’ accomplishments and wanted to share this good news with you. As a firm we continue to strive daily to deliver the highest quality legal services to our clients throughout Michigan and beyond.

Dan A. Penning

New Rulings Could Hold Employers Liable for Employee Actions While Commuting

In Michigan, an employer could be held liable for an employee’s actions while traveling if the trip involved a service or benefit to the employer. This is true even if the employee is driving his or her own vehicle, especially if the employee is traveling on business or to an important business meeting. Generally, if an employee has a primary place of business, an employee’s actions while traveling to and from that location do not expose the employer to liability. But in a recent case, the Michigan Court of Appeals considered that an employee’s normal place of employment could be her vehicle.

In the case, the employee had struck another woman with the employee’s own vehicle while “going to work.” Because the employee’s job entailed traveling in her car 60% of the time, the Court determined that she could have been acting within the scope of her employment at the time so as to impose liability on the employer for the other woman’s damages. The Court reasoned that “driving to work” is different for employees who travel significantly than it is for someone who works at one primary location.

Rulings such as this could open the door for more attempts to hold an employer liable for actions of an employee while traveling. Maintaining detailed travel records for employees might help employers defending such cases. Also, comprehensive general liability insurance policies should be reviewed to make sure coverage extends to these situations.

Dan A. Penning

Recent Amendments to Family Military Leave Provisions of Family and Medical Leave Act (FMLA)

Amendments to Family Medical Leave Act (FMLA)

On October 28, 2009, President Obama signed into law the National Defense Authorization Act for Fiscal Year 2010 (”NDAA”). Although the NDAA is a defense appropriations law, it includes amendments to the family military leave provisions of the Family and Medical Leave Act (”FMLA”). These recent changes to FMLA deal primarily with qualifying exigency leave and military caregiver leave.

Qualifying Exigency Leave
The NDAA expands the exigency leave available under the FMLA to eligible family members of active-duty service members, and also amends the FMLA to provide eligible employees with up to 12 workweeks of leave during the designated 12-month FMLA leave year when the employee’s son, daughter or parent (who is a “covered military member”) is on active duty or call-to-active-duty status for one or more qualifying exigencies. Prior to these amendments, FMLA qualified exigency leave applied to Reserve and National Guard members only, and not members of the regular Armed Forces. Qualifying exigency leave includes: short-notice deployment; military events and related activities; child care and school activities; financial and legal arrangements; counseling, rest and recuperation; post-deployment activities; and any other event the employer and employee agree is a qualifying exigency.

Military Caregiver Leave
Additionally, the NDAA extends eligibility for military caregiver leave to the families of veterans, not just current members of the Armed Forces. Caregiver leave provides eligible employees, who are the spouse, son, daughter, parent or next of kin of covered military members of the Armed Forces, including members of the National Guard or Reserves, 26 workweeks of leave during a 12-month period to care for that military member, who because of a serious injury or illness, is undergoing medical treatment, recuperation, or therapy, is in outpatient status, or is otherwise on the temporary disability retired list. The law extends the 26 weeks of leave to family members of veterans who are undergoing medical treatment, recuperation, or therapy for a serious injury or illness at any time during the period of five years preceding the date on which the veteran undergoes that treatment. Therefore, the caregiver would be able to take up to 26 weeks of leave to care for a veteran for up to five years after the military member leaves military service.

These changes, presumed to be effective immediately, will once again require employers to update their FMLA policies and inform proper personnel accordingly.

Dan A. Penning