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Employment Law Newsletter

Twenty years after its passage, most employers are aware that the Family and Medical Leave Act (FMLA) provides qualifying employees with up to 12 weeks of job-protected leave for varying circumstances. However, employers may not be aware that the U.S. Department of Labor recently issued new rules and an Interpretive Guidance that will likely expand the number of employees eligible for leave under the FMLA. Employer personnel responsible for handling leave requests must be aware of these developments to ensure proper administration of employee leave rights under the FMLA.

DOL Guidance Clarifies Leave Rights to Care for Adult Children: Among the circumstances where eligible employees may invoke FMLA rights is a leave to care for a son or daughter with a serious medical condition. The FMLA’s definition of “son or daughter” includes an child who is “incapable of self-care because of a mental or physical disability.” One of the unresolved issues under this definition was whether the age of the child when the disability began could be considered when making eligibility determinations for the parent. On January 14, 2013, the DOL issued interpretive guidelines clarifying that the age of the son or daughter at the onset of the disability is not relevant, and thus a qualifying parent is entitled to leave regardless of the age of the child or when the disability arose.

Employment Newsletter

On the 20th anniversary of the Family and Medical Leave Act (FMLA), the U.S. Department of Labor (DOL) issued results of a survey of 1800 employers and 2,800 employees designed to measure the law’s impact on these constituent groups. Some of the survey’s more significant findings include:

  • Employer knowledge of the FMLA’s requirements has increased to 66%.

Employment Law Newsletter

Effective January 1, 2013, employers using third parties to conduct applicant/employee background checks must issue an updated Fair Credit Reporting Act (FCRA) notice to affected applicant/employee. Under the FCRA, employers must issue the updated notice summarizing rights under the FCRA whenever the employer intends to obtain a consumer report on the employee/applicant, or when the employer intends to take any adverse action based upon the report. Copies of the new form are available at www.consumerfinance.gov/learnmore.

Employment Law Newsletter

In a decision that may ultimately negate any post January 2012 decisions issued by the National Labor Relations Board (NLRB), the D.C. Circuit Court of Appeals in January 2013 struck down as unconstitutional three controversial “recess” appointments to the NLRB by President Obama. The court held that the presidential power to make appointments when Congress is in “recess” (and therefore unavailable to vote on the nominations) does not apply to a generic break in Congressional proceedings for several days. The President’s nominations were made in January 2012 when the Senate was not in recess but was meeting in sessions every three days and thus were unconstitutional from their inception.

Although the issue is far from settled – the U.S. Supreme Court has decided to hear the recess appointments issue – the questionable status of the currently constituted Board may be fatal to a slew of decisions issued under the recess appointees. At issue in many of these rulings was whether employer policies and practices infringed upon employees’ rights under Section 7 of the National Labor Relations Act (NLRA) to engage in “concerted activity,” including discussion of the terms and conditions of employment with coworkers. Although the NLRA was historically implicated in unionized workplaces, its protections apply to non-unionized workplaces as well, and non-unionized employers are increasingly targeted by the NLRB for violations of the Act. These decisions have created a firestorm among employers, who view the NLRB’s recent pronouncements as pro-union attacks upon employers’ abilities to reasonably manage their workplaces. Below is a summary of some of the Board’s more controversial rulings:

Employment Law Newsletter

Lady Gaga’s formal personal assistant (and former personal friend) has filed suit against the pop star for violation of the overtime payment requirements of the Fair Labor Standards Act (FLSA), which requires overtime payment for all hours worked in excess of 40 hours to employees who are not exempt from the FLSA’s overtime mandate. The assistant claims that she was on duty 24 hours a day to attend to the Lady Gaga’s every personal need, without the benefits of breaks or even time to sleep. Contrary to a common misperception among employers, the fact that the assistant was paid on a salaried basis is immaterial to the question of whether or not she qualifies as an exempt employee under the FLSA – an unlikely prospect given the nature of her job duties. Lady Gaga could be looking at significant liability because under the FLSA, a prevailing employee is entitled to 2 times the amount of unpaid wages due in the preceding 2- or 3-year period, plus interest and attorney fees, which often eclipse the unpaid overtime.

Employment Law Alert

Many employers administering leave under the FMLA are ignorant of the following notices that must be provided to employees invoking FMLA leave rights:

Eligibility Notice: provided within five business days of a leave request informing the employee whether or not they meet the FMLA’s eligibility requirements. In most cases, this notice is sent the employer is in possession of a medical certification or other information needed to make a final determination whether leave request qualifies under the FMLA.

President Obama, using the autopen, signed the American Taxpayer Relief Act of 2012 (the “Act”) into law on January 2, 2013. The following is a summary list of the Act’s major changes to and extensions of prior law. We will keep you informed of possible important updates resulting from a comprehensive tax reform.

Individual Income Tax Rates. The Act keeps in place the Bush-era income tax rates for most individuals (staying at 10%, 15%, 25%, 28%, 33%, and 35%) except that the highest marginal income tax bracket rises to 39.6% for individual filers whose taxable income is more than $400,000 ($450,000 for joint filers and for qualifying surviving spouses; $425,000 for qualifying heads of households; and $225,000 for married taxpayers filing separately).

Medicare Taxes. The Act does not affect the Medicare taxes effective in 2013. There will thus be an additional 0.9% Medicare tax on wages over $200,000 for single individual filers ($250,000 for joint filers and qualifying surviving spouses; $200,000 for qualifying heads of households; and $125,000 for married taxpayers filing separately). The 3.8% Medicare tax on certain net investment income also starts to apply to single individual filers with modified adjusted gross income over $200,000 ($250,000 for joint filers and for qualifying surviving spouses; $200,000 for qualifying heads of households; and $125,000 for married taxpayers filing separately).

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Sooner or later, your facility will be the subject of an inspection by the Occupational Safety and Health Administration (“OSHA”). OSHA usually does not provide any advance notice of these inspections (which always seem to occur at the “wrong” time). Nevertheless, how facility representatives handle themselves can directly influence the severity of the outcome of the inspection.

To help you improve your company’s chances of a favorable outcome, basic procedures and rules must be carefully followed. Safety Officers and Plant Managers can and should be prepared for these inspections and must be able to quickly and easily implement a well-practiced and automatic response at the time. Time spent in preparation of these visits will ensure that the facility is exhibited in its most favorable light. This will minimize both the time the Inspector spends at the facility as well as the severity of any penalty assessment.

Your OSHA inspection response/action plan should take into account the following elements:

Today’s low interest rate environment, coupled with generous gift and estate tax exemptions, has made this an ideal time to effectively transfer wealth to heirs. Under the Internal Revenue Code (the “Code”), Section 7520, the Internal Revenue Service (the “IRS”) uses a rate based on 120 percent of the Midterm Applicable Federal Rate to discount the value of an annuity, an income interest for life or a term of years, or a remainder or reversionary interest in a trust to present value (hereinafter referred to as the “7520 Rate”). The IRS published the 7520 Rate (which varies from month to month) for September 2012 in Revenue Ruling 2012-24: the 7520 Rate is at the historically low rate of 1.0%. This presents attractive estate planning opportunities for those interested in the following techniques: (1) Grantor Retained Annuity Trusts (“GRATs”); (2) Charitable Lead Annuity Trusts (“CLATs”); and (3) Intra-Family Loans.

GRATs allow a person to transfer property with high appreciation potential to an irrevocable trust while also retaining the right to receive a fixed annuity payable at least annually for a chosen number of years. At the end of the annuity term, the remaining trust property passes to the grantor’s beneficiaries. The transfer of the property to the GRAT is a gift for gift tax purposes to the extent that the initial value of the trust property exceeds the present value of the grantor’s retained annuity interest for the month the GRAT is created. The present value of the grantor’s retained annuity interest is determined using the 7520 Rate for the month the GRAT is created. If the trust property appreciates at a rate exceeding the 7520 Rate, the grantor will be successful in passing wealth to the beneficiaries free of estate and gift taxes. The catch is that the grantor must survive the annuity term; otherwise, the trust property is included in the grantor’s estate for estate tax purposes at its date-of-death value. The minimum annuity term of a GRAT is currently two years.

Those with charitable impulses may want to consider using CLATs. Under the terms of a CLAT, a charity receives annuity payments for the term of the trust; at the end of the term, the balance of the property remaining in the CLAT passes to one or more non-charitable beneficiaries (e.g., the children of the donor). The annuity amount is valued by assuming that the charity’s lead interest will earn a rate equal to the 7520 Rate for the month the donor funds the CLAT. Accordingly, donors also benefit from a CLAT in a low interest rate environment because the investment performance must exceed only the 7520 Rate to result in the passing of wealth without estate and gift taxes; while outside the scope of this alert, there are Generation-Skipping Transfer Tax implications if the non-charitable beneficiaries include certain related individuals (e.g., grandchildren of the donor).

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