News and Articles

Update to FLSA Will Make Millions More Eligible For Overtime Pay

Yogi Patel - Friday, July 08, 2016

As of December 1, 2016, the number of employees eligible for overtime will dramatically increase due to an update to the Federal Labor Standards Act (FLSA). Previously under the FLSA, employees who made over $23,600 per year and met certain other requirements were exempt from mandatory overtime compensation. Under the revised regulations, the threshold figure will jump to $47,476 per year. This increase is estimated to render an additional 4.2 million workers eligible for mandatory overtime. The stated purposes of the amendments were to: 1) update the salary threshold to match current economic realities and thereby bring the regulations in line with the original intent of the FLSA; and 2) to make the rules easier for workers and businesses to understand and apply. By increasing the number of workers eligible for overtime pay, employers will have significant decisions to make regarding their employees’ wages, hours, and duties.

What is the Fair Labor Standards Act?

The Fair Labor Standards Act is a federal law that governs the minimum wage, overtime pay, recordkeeping, and child labor standards for all full-time, and part-time workers in the private sector and in Federal, State, and local governments. One purpose of the FLSA is to ensure that all workers are fairly compensated. Generally speaking, the Act requires employees be paid at least the federal minimum wage for all hours worked, up to 40, in a given week. Any hours above 40 worked in a given week must be compensated as overtime pay at no less than one and one-half times the employee’s regular rate of pay.

While the rules apply to most employees, there are workers who are exempted from the FLSA’s protections. To be exempt, the employee’s specific job duties and salary must meet all the requirements of the regulations.

Currently, with few exceptions, employees who are paid a salary of at least $23,600 per year ($455 per week) and whose jobs can be described as executive, administrative, or professional are exempt from overtime pay – this is referred to as the white-collar exemption. Likewise, employees who are paid more than $100,000 per year and who regularly perform an executive, administrative, or professional duty (“highly compensated employees”) are exempt from the overtime requirement even where they might not otherwise meet all the specific requirements under a particular classification.

Job titles do not determine whether a job position will be exempt, rather, an examination must be made of the actual duties of an employee to determine if her position may be considered executive, administrative or professional under the law. Employers are advised to consult with their attorney to fully assess whether or not its employees’ duties fall under the exemptions.Generally speaking, the White Collar exemption recognizes that employees who reach a certain level or compensation do not need the same wage protections as lower-wage workers and seeks to avoid putting a substantial burden on employers. However, the salary threshold has been eroded by inflation and increases in costs of living through the years, and employees are not being compensated proportionately to the rising market. Therefore, advocates claim that the current overtime exemption threshold needs to be adjusted upward to update the law to fit its original purpose of ensuring adequate pay for workers.

The Overtime Rule Update

With the need to increase the salary threshold to keep up with economic realities, the overtime rules are being amended. The revised regulations are expected to extend overtime eligibility to an estimated 4.2 million full-time workers and are intended to make the rules more clear for workers and employers. Specifically, as of December 1, 2016, the updated regulations will:

  • •  Raise the eligibility requirement for overtime pay from $455 per week ($23,600 per year) to $913 per week ($47,476 per year). This means that 35% of full-time salaried workers will be automatically entitled to overtime based solely on their salary.
  • •  Raise the eligibility requirement for those exempt as “highly compensated employees” to the 90th percentile of full-time salaried workers nationally, or from $100,000 to $134,004 per year.
  • •  Automatically update the salary threshold every three years, starting January 1, 2020, based on wage growth over time. Each update will increase the standard threshold to the 40th percentile of full-time salaried workers in the lowest-wage Census region, estimated to be $51,168 in 2020. For “highly compensated employees,” the threshold will increase to the 90th percentile of full-time salaried workers nationally, estimated to be $147,524 in 2020.
  • • Allow up to 10% of the salary threshold to be met by non-discretionary bonuses, incentive pay, or commissions, provided they are made on at least a quarterly basis.

Employers are not required to convert a salaried employee who gets paid less than the salary threshold to an hourly status. Employers can continue to pay the nonexempt employee on a salary basis and pay overtime for all hours worked over 40 in a workweek.

Employer compliance with the Overtime Rule

The Department of Labor does not dictate any method of compliance and employers have the discretion to decide how they will comply with the revised regulations. There are numerous options for compliance including:

  • •  Continue paying the employee’s current salary in addition to paying overtime. This option is most viable where the employee occasionally works overtime due to spikes in the workload. Employers can more carefully budget and plan for the increased pay during those periods.
  • •  Raise the employee’s salary to maintain their exempt status. If the employee’s salary is above $47,476 per year and his or her duties meet the duties test (described as executive, administrative or professional), the employee is exempt. This option is practical if the employee who works 40 hours per week is already being paid close to the $47,476 salary requirement.
  • •  Evaluate and modify the employee’s workload. The need for overtime could be eliminated where employers appropriately distribute the workload and allow for adequate staffing levels.
  • •  Adjust employee wages. Employee’s earnings can be adjusted to reallocate it between regular wages and overtime so the total amount paid remains roughly the same. This option is preferred where employees work a consistent and a small number of overtime hours. Note that employers are prohibited from reducing an employee’s hourly wage below the federal or applicable state-level minimum wage (whichever is higher).
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  • The method an employer chooses will be dependent on its particular circumstances with particular consideration given to the number of employees, how much employees currently earn, and how often employees work overtime. Additionally, employers and employees should be aware that while federal law sets minimum national standards, states may impose heightened requirements under their own laws, so it is essential to understand any applicable local rules and regulations. Compliance with the FLSA does not guarantee compliance with state or local laws. And finally, as every employer has its own unique situation, it is always advised to consult with an attorney to discuss a business’s particular needs.
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This information is not intended to provide or be construed as legal advice. Before taking steps to comply with the new overtime regulations, please consult with an attorney to fully assess your unique situation.


 

Recommended Business Practices for I-9 Compliance

Yogi Patel - Friday, July 08, 2016

 

Under the Immigration Reform and Control Act of 1986 (“IRCA”), employers may only hire people who are authorized to work in the United States. To this end, employers have the burden of verifying that their prospective employees are authorized to work before they commence employment. However, as an individual’s work authorization is inextricably linked with their immigration status, federal law also requires that the work verification process must not discriminate against workers on the basis of immigration status, nationality, accent, or appearance.

To comply with the law, employers must verify the identity and employment eligibility of employees by completing the I-9 Employment Eligibility Verification Form (“Form I-9”). The I-9 must be completed for all prospective employees, not just those that the employer believes to be unauthorized workers. In conjunction with the I-9 form, employers must collect certain documents for the purposes of verifying a prospective employee’s identification and work status. Employers must follow strict guidelines in requesting these forms of identification and may not reject reasonably genuine-looking documents. Violations of these requirements under IRCA can subject an employer to allegations of discrimination, months of federal investigations, loss of government contracts, large fines, and negative publicity.

 

Filling out the I-9 Form

Because of federal discrimination laws under IRCA, employers cannot just ask prospective employees to fill out a Form I-9. The form must be incorporated into a hiring process that ensures equal treatment of everyone.

Employers can only present the I-9 Form after an offer of employment and an acceptance from the employee have been made. Once the offer of employment is accepted, the employee must complete Section 1 of the I-9 Form on or before the first day of work. The employee is required to provide her full legal name, current address, and date of birth. The employee is only required to provide a social security number if the employer uses E-Verify (which is not mandatory but has benefits for employers). In addition, the employee must attest under the penalty of perjury her citizenship status or employment-authorized immigration status. If applicable, the employee must also provide her Alien or Admission Number along with the employment authorization expiration date. Finally, the employee must sign and date Section 1 certifying the information is true. Any translator or preparer who assisted must also provide their name, address, and signature. The employer must review the information to ensure completeness of all required fields.

Within three business days of the employee’s first day of work, the employer must complete Section 2, which requires the employee to present acceptable documents to verify the employee’s identity and eligibility for work. Acceptable documents are divided up into three categories: A, B, and C. List A consists of documents that verify both identity and work eligibility; List B contains documents that verify only identity; and List C contains documents that verify only employment authorization. The employee may either present one document from List A only, or a combination of one document from List B and one from List C. The employee has the right to choose which documents to present - the employer is strictly prohibited from specifying any particular documents it will accept. Once the employee presents the required document(s), the employer then determines whether the document(s) appear to be genuine and related to the individual. Thereafter, the employer can record the document information on the Form I-9.

The employer or an authorized representative must record the title, issuing authority, number and expiration date, if any, of the document, fill in the employment date, and sign and the Form I-9. Employers who complete the form early or improperly, ask the wrong questions, or who require or refuse to accept a particular document could be found liable for discrimination and be subjected to significant penalties.

Employers must complete an I-9 Form for all employees, and keep the original forms for three years after the date of hire or one year after the date the employment ends, whichever is later. Employers may choose to make copies of the employment eligibility verification documents, and if so, must make copies for all employees and retain those copies with the I-9 Forms.

 

I-9 re-verification requirements

  • An employee who is not a U.S. citizen or a permanent resident is likely working based on a work authorization status with an expiration date. The employer must record the expiration date on the employee’s I-9 Form and in Section 3 of the form and re-verify the employee’s work authorization document before the expiration date. Employers should establish a reliable system for prompt re-verification; thereby reducing the risk employers could face of employing someone no longer eligible to work and to appropriately alert employees that they need a work visa extension to remain in legal status.

 

Some examples of discrimination

•  Employers are cautioned from engaging in the following practices:

•  Requesting to see employment eligibility verification documents before hiring an individual because that person has a foreign accent or someone said that person is from a different country.

Refusing to accept a particular employment eligibility verification document or refusing to hire someone, because that person presented a document with an expiration date.

•  Refusing to accept a particular employment eligibility verification document that is acceptable by law and that appears to be reasonably genuine.

•  Requesting to see a specific document for the completion of the Form I-9. Employers should only accept the documents that are required for verification (one from List A or one from List B and List C). For example, an employee who already presented a document from List B and List C does not need to also present one from List A. An employer who then asks for a document from List A is subject to an allegation of discrimination.

•  For recordkeeping purposes, making copies of employment eligibility verification documents only for non-U.S. citizens but not making copies for U.S. citizens. Employers are not required to make copies of the verification documents. If an employer chooses to make copies, copies should be made for all employees.

•  Setting different employment eligibility verification standards for different individuals or requiring that employees provide different documents, based upon national origin or citizenship status. All employees should be treated the same and should go through the same process.

•  Adopting a policy that the employer will only hire U.S. citizens. Note that some jobs do require U.S. citizenship by law, regulation, executive order, or federal, state, or local government contract.

•  Requesting during re-verification that an employee presents a new unexpired employment authorization document if one was already presented during the initial verification.

•  Engaging in threats, intimidation, retaliation, or discharge against an employee who exercises their rights under the anti-discrimination law.

 

Penalties for I-9 violations

Employers that hire unauthorized workers can be fined anywhere from $250 up to $5,500 per worker depending on their prior history of violation. Additionally, employers can be barred from competing for government contracts if they knowingly hire or continue to employ unauthorized workers. Mistakes or missing items on required forms can result in a $100 up to $1,000 fine per form. Moreover, employers who miss a form could be fined up to $1,000. For example, an employer who does not complete the I-9 Form for 100 employees could face a $100,000 fine.

 

Recommended business practices to avoid allegations of I-9 discrimination

•  Employers are at risk of severe penalties for failure to comply with the anti-discrimination provisions of the IRCA. The risk could be minimized by undertaking several steps, including:

  • Establishing a regular training program, conducted by an attorney familiar with IRCA rules, regarding I-9 compliance for employers or representatives authorized to fill out the Form I-9 - i.e. Human Resource professionals.

•  Establishing a system to re-verify employment authorization documents in a timely manner. This will reduce the risk employers face of employing an individual with expired documents and will also help ensure the employee’s documents are up to date.

•  Conducting an internal audit of the I-9 files to disclose any pattern of violation requiring remediation. An attorney familiar with the IRCA should supervise this audit.

•  Establishing a quick process in which employers or human resource professionals can check in with an attorney regarding I-9 verification questions.

Overall, while the I-9 process can seem straightforward on the surface, it can be incredibly easy for the most well-intentioned employers to unwittingly commit IRCA violations. Rather than risk being subjected to an audit by the Department of Justice and substantial penalties, employers should consult with an attorney to review their employment verification process and ensure that everyone involved is in strict compliance with IRCA’s requirements.

 

 

Legal Update - May 2016 Newsletter

Yogi Patel - Thursday, May 12, 2016

Dear valued clients and supporters: This month's newsletter will focus on: (1) the I-9 employment verification process; (2) the gradual rise in the minimum wage to $15 per hour in NYS; and (3) paid medical leave in New York.

The I-9 Verification Process
The Form I-9 is the primary mechanism that employers are required to use for the purposes of verifying an individual's identity and authorization to work in the United States. Under federal law, employers must have all prospective employees complete an I-9 form, along with other official documents, before they are able to commence their employment. However, as federal law also protects all individuals against immigration-based discrimination, employers cannot simply have job applicants fill out an I-9; they must integrate the I-9 into a hiring process that ensures equal treatment of everyone. For example, if an employer asks an an individual as part of the job application to fill out an I-9, the employer could be found to have committed employment discrimination and/or document abuse. It is only after an employer has decided to hire someone that the individual's authorization to work may be verified. Further, when an employee is completing an I-9, an employer may not insist that the employee provide a specific employment authorization document, such as a passport or green card. Federal law provides a list of acceptable documents an employee may provide, and an employer who attempts to restrict the list will be penalized. The punishment for acts of employment discrimination and/or document abuse can be as much as thousands of dollars per violation, which can quickly add up to tens or hundreds of thousands of dollars depending on how many applicants an employer processes. The financial penalties increase for repeat offenders, and eventually employers can be imprisoned if they engage in a pattern of hiring unauthorized workers. For further information on the proper protocols employers should follow and how to avoid the pitfalls of the I-9 process, please return here to our website next month for a more in-depth article.

$15 Minimum Wage
As part of the 2016-2017 state budget, legislation in New York was passed that gradually will raise the minimum wage state-wide to $15 per hour. The increases will vary based on business size and location according to the following schedule: For New York City businesses with 11 or more employees, the minimum wage will be $11 per hour at the end of 2016, after which it will increase by $2 annually until it reaches $15 on December 31, 2018. For New York City businesses with 10 or fewer employees, the minimum wage will be $10.50 per hour at the end of 2016, then it will rise by $1.50 per year until December 31, 2019, when it reaches $15. For businesses in Nassau, Suffolk, and Westchester Counties, the minimum wage will be $10 per hour by the end of 2016, followed by annual increases of $1 until it reaches $15 on December 31, 2021. Finally, for business elsewhere in the state, the minimum wage will be $9.70 per hour at the end of 2016, and it will grow by 70 cents a year until it reaches $12.50 on December 31, 2020. At that point, the minimum wage will continue to increase until it reaches $15 per hour according to a new schedule to be set by the Division of Budged (DOB). One minor caveat to this legislation is that in 2019, the DOB Director will analyze the regional economies state-wide and will have the authority to freeze any increases deemed necessary. Employers and Employees alike should stay abreast of any and all updates to the minimum wage and the scheduled increases as set by the DOB.


Paid Family Leave
Also as part of the 2016-2017 budget, legislatures passed a program that entitles employees to 12 weeks of paid family leave to care for a newborn or a seriously ill family member. Beginning in 2018, employees who have worked for an employer for six months will be eligible to receive 50 percent of their average weekly wage for up to 12 weeks under the program. The total amount an employee may receive will be capped at 50 percent of the state-wide average weekly wage. By 2021, the figures will increase to 67 percent of an employee's average weekly wage, capped at 67 percent of the state-wide average. The program will be funded through a small payroll deduction, so there will be no costs to businesses. Employers should, however, ensure that their payroll practices are updated as the implementation date for the program approaches.

Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on these and other issues throughout the month.

 

The Convention on the International Sale of Goods – Essential Information for Global Businesses

Yogi Patel - Tuesday, April 12, 2016

Since 1980, the Convention on the International Sale of Goods (CISG) has served as the default body of international law that governs most sales of commercial goods between businesses located in Contracting States to the CISG. A Contracting State is a country that has incorporated the CISG’s terms into its law. The United States is one of 84 Contracting Parties to the CISG. 

What many international businesses fail to realize is that absent proper, written agreement to the contrary, the CISG may automatically govern any contract they enter into regarding the sale of commercial goods. While there are certain requirements for the CISG to apply and many exclusions from its coverage, businesses are best served to make sure their contracts meet the necessary legal requirements for ensuring that the CISG does not unexpectedly apply to their transactions.

As a threshold matter, the CISG will only apply if the parties involved have reason to know that at the time of the formation of the contract between them that they have “places of business” in different contracting states. The CISG considers a place of business to be the location that has the closest relationship to the contract and its performance. Even between two parties who have places of business in different Contracting States, the CISG specifically does not apply to the sale of consumer goods, stock or other securities, negotiable instruments, airplanes, ships, vessels, and electricity; mixed contracts where the seller is mostly contributing labor or services; the liability of the seller for the death or injury caused by goods sold; and goods that are sold at auction.

What that leaves are contracts and transactions involving the sale of commercial goods between businesses in different Contracting States. For example, the CISG would apply to a contract between a French cheese producer selling to a buyer in the United States. While the parties involved are free to allow the CISG to apply or to expressly designate it as their choice of law in the contracts between them, if the parties desire that some other jurisdiction govern, it is not as straightforward an election as they might assume. Merely stating that a contract is to be governed and interpreted by a particular jurisdiction, such as the laws of New York State, does not suffice to waive the application of the CISG where it applies by default. In the contract between the parties, it must also expressly state that the CISG is waived, that the parties do not wish for it to apply, and that they elect some other law instead.

One example of how the CISG differs from other laws is that it contains no statute of frauds provision. Statute of frauds refers to the idea that certain contracts or contracts above a threshold amount need to be evidenced by something in writing in order for them to be enforceable. For example, under the Uniform Commercial Code, which governs many sales of goods that the CISG does not, any sale of more than $500 must be evidenced by a writing. If the same contract were governed by the CISG, a court could find an oral agreement was binding.

While there are additional examples of the consequences of having one jurisdiction apply instead of another, the most important idea business owners should retain is that once they know which laws they want to govern a particular contract, they must be extra careful with the language they use in their choice-of-law provisions. Additionally, it is not always clear whether or not the CISG does apply to a particular transaction or contract, so business owners are best advised to seek the advice of counsel and make sure their contracts are intelligently drafted to meet their particular needs.

 

This article is not intended to provide not should be construed as providing legal advice. Before entering into any business transaction, you should consult with an attorney to fully assess your unique situation and ensure that your rights and interests are protected.

 

Apple vs. FBI – Technology and the New Legal Frontier

Yogi Patel - Wednesday, March 09, 2016

Mobile devices in general have arguably taken over as the main portal through which significant portions of people in our society communicate. And with the advancement of technology, the mobile device is now and will continue to become, the main portal through which we engage in every day transactions. We can now use our phones to engage in banking, ordering groceries, booking vacations, researching novel questions, storing our personal information and to do just about anything else we want. The amount of data that can be derived from our mobile devices can reveal just about every aspect of our day-to-day lives. From the websites we visit, to the phrases we search. Our phones, for better or worse, can probably reveal more about us than we could if we tried to provide our own narrative. Think about how naked and vulnerable you felt the last time you left home without your phone. For most of us, it has become a necessity. We truly cannot imagine life without our mobile devices – and this is not going to change anytime soon. We will undoubtedly continue to use our mobile devices to share even more personal information about ourselves. And with this in mind, consider the dispute between Apple and the FBI –which is ultimately between privacy and safety.

The iPhone is known for its nearly impenetrable security features and thus, is one of the many reasons that Apple’s products are considered superior to others in the market place. The latest challenge to privacy comes in the form of the unlocking the iPhone of one of the San Bernardino shooters. The FBI has been unable to unlock and access the device and is now relying on the courts to compel Apple to do so. Apple is not complying because it fears future implications of the government’s ability to access their devices.

While the FBI has only requested that Apple help the government access the gunmen’s iPhone, the broader implications of the request are the true cause of conflict and concern here. The government is essentially asking for Apple to create an encryption system that would provide them access to any Apple device after securing a warrant. The Government’s position appears to be carefully considered and narrowly tailored. Many experts consider this case as the “perfect case” for litigating the issue of privacy concerns against the governments need to access incriminating information in the evolving world where technology controls access. Since the case involves terrorism, the government’s interest in encroaching on privacy concerns is less likely to cause a public outcry and provides sufficient justification for the court’s to reach a decision allowing it to gain access to an encrypted system.

Besides the privacy vs. security considerations implicated here, this case also raises the issue of how far the government can go in requiring a business to perform functions that have no financial value to the Company. In this case, the FBI wants Apple to develop a new version of the iPhone operating system, whereby the new versions would allow the government to bypass the security features on its product. The sole purpose of this software would be to allow the government to have access to the data on such phones when appropriate. Apple’s shareholders do not stand to gain financially by cooperating with the government. In fact, developing this software would arguably weaken Apple’s overall security system and potentially have a negative impact on its market-share and subsequently the value of the Company to its shareholders.

The implication of this dispute also extends to how other privileges could be potentially compromised. Given that smartphones such as the iPhone store so much personal data, it is important to note that if the government were given such access, they would ultimately be able to access emails, photos, and text messages. This access would present challenges to right of privacy amongst privileged relationships. For example, confidential communications between attorney and client, marital communications amongst spouses and patient-psychotherapist relationship may be easily penetrable.

Other technology companies such as Microsoft, Google, Facebook, Twitter and Dell understand the implications of this dispute as well. Most have pledged support for Apple and are expected to submit Amicus positions in the pending litigation. These companies also fear that the government will make similar requests thus compromising their security and intellectual property.

 

This Article was co-authored by Asima Chaudhary, an intern at Lloyd Patel LLP and a second year law student at the City University of New York Law School.

 

New York City Commission on Human Rights Announces Huge Increase in Discrimination Awards in 2015

Erin Lloyd - Wednesday, March 09, 2016

The New York City Human Rights Law applies to most employees working in the five boroughs, and it expands the anti-discrimination protections found in New York State and Federal law. Under Mayor Bill de Blasio, newly appointed Chair Carmelyn P. Malalis, and the current City Council, the New York City Commission on Human Rights—the agency responsible for enforcement and implementation of that law—has stepped up its efforts, and the results are beginning to become clear.

The Commission recently announced that it doubled the average amount collected in damages and civil penalties assessed in employment discrimination claims filed with it, collecting nearly $1.4 million in 2015 alone.

The work of the agency has also increased, with 755 investigations opened in 2015, a 20 percent increase from the prior year. Of those investigations, disability-related complaints comprised the highest proportion of complaints filed, at 31 percent, followed by race-related complaints at 20 percent, and gender-related complaints at 18 percent. National origin discrimination complaints accounted for 15 percent of the complaints filed in 2015.

The New York City Human Rights Law also prohibits discrimination in housing against individuals receiving government assistance with their rent, and complaints of this nature made up 11 percent of the Commission’s cases last year. According to the Commission, their investigations of these types of complaints quadrupled in 2015, from 23 investigations in 2014 to 86 in 2015.

The Commission was able to resolve more than 100 of their cases by settlement or agreement, rather than trial, including both employment and housing complaints, but that leaves a substantial number of investigations that resulted in or are still waiting for trial with the Commission.

Claims that fall under the New York City Human Rights Law can be either filed in court or filed with the Commission, but once a claim is filed in either venue, a plaintiff cannot change his or her mind and file it in the other venue. For that reasons, and many other reasons, consulting with an attorney prior to filing any claims is important. Our attorneys represent employees in a wide variety of employment matters and would be happy to schedule a consultation to discuss your particular situation.

For more information, contact us here

 

Legal Update - February 2016 Newsletter

Yogi Patel - Monday, February 08, 2016

 

Dear valued clients and supporters: This month's newsletter will focus on: (1) Updates and developments under New York State Human Rights Law and guidelines issued by the New York City Commission on Human Rights and (2) recent developments at Lloyd Patel LLP.


New York State Human Rights Law Developments
Employers and employees are advised that several new protections for employees under New York State Human Rights Law passed by the State Assembly last year went into effect on January 19, 2016.

One amendment expands on existing prohibitions against paying women less than their male colleagues for performing similar work and clarified what criteria would be appropriate for differential in pay not based on gender/sex. The same amendment also made it easier for women to find out of they are being paid equally and protects them from retaliation for sharing wage information with other employees. Additionally, New York State Human Rights Law now requires that employers provide reasonable accommodations to pregnant employees in the form of schedule adjustments or alterations in job duties. Other amendments prohibit discrimination against employees based on their familial status (specifically against single mothers); allow victims of employment and/or credit discrimination based on sex/gender to recover attorney's fees when they file claims; and expand protections to all employees, including those previously exempt, against sexual harassment.

The Assembly also made two amendments to New York State Human Rights Law unrelated to employment. One such amendment protects individuals against discrimination and eviction based on their status as domestic violence victims. Another amendment augmented the state's human trafficking laws by increasing the penalties for traffickers, providing training to law enforcement officers, and allowing trafficking victims to sue for damages, including attorney's fees. Individuals and employees should familiarize themselves with these new developments to ensure that they know their rights and that all parties are in compliance with New York State Human Rights Law.

New York City Commission on Human Rights
Employers and Employees are advised that the New York City Commission on Human Rights issued legal enforcement guidelines on the protections against discrimination, harassment, and retaliation based on gender identity and expression under New York City Human Rights Law. The guidelines rebuke acts and omissions that intentionally refuse to use an individual's preferred pronoun or title; require that individuals be allowed to use whatever bathroom is consistent with their expressed gender; and prohibit the imposition of uniforms or grooming standards based on sex or gender. The Commission's mandate includes other protections, including health care-related protections for transgendered people, it makes clear that the guidelines are a floor, not a ceiling, and that there is an overall intent to prohibit any form of gender identity-based discrimination.

Employers are advised to analyze and implement their policies and procedures accordingly.

Development at Lloyd Patel LLP
We are pleased to announce the re-location of our main office to 65 Broadway, 7th Floor. New York, NY 10006.
And we are also excited to announce expansion plans and the opening of a satellite office in Long Island City, which we anticipate to be operational by March 1, 2016. Additional details will be forthcoming on Facebook, here on our website and next months's newsletter.

Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on these and other issues throughout the month.

 

When a Trademark Licensor Goes Bankrupt

Yogi Patel - Tuesday, January 05, 2016

Businesses often enter into licensing agreements to use a trademark belonging to someone else. One of the most essential circumstances to consider before expending any resources on a trademark license is what happens in the event that the owner of the trademark declares bankruptcy. Businesses who develop products, perform research, and make sales revolving around a trademark license, savvy planning in advance is essential for protecting their interests. Poor planning or a failure to do so can result in the license being revoked, even if paid for in advance, resulting in the licensee's business potential failure. A more in-depth article on this issue is now available on our website.

In general, courts have found trademark licensing agreements to be executory, meaning the parties to the agreement still have duties remaining to be performed. When a licensor declares bankruptcy, it has the option of assuming or rejecting the agreement. If the agreement is accepted and certain conditions are met, everything continues as normal. However, if the agreement is rejected, there is the very real risk that the licensee will lose all rights to use the trademark, leaving the owner free to re-license the trademark to someone else. While Bankruptcy laws offer some protections for intellectual property, such as patents, copyrights, and trade secrets, courts have split on whether trademarks are included. Because Bankruptcy Courts have the authority to resolve trademark issues, licensees must take steps to minimize the risk of an unfavorable decision.

One possibility is to structure the licensing agreement as a sale or assignment of the trademark. This minimizes or reduces the risks to the licensee as it transfers ownership in the trademark and creates a non-executory contract. However, when this is not possible, another option is to require that the trademark be owned by a limited liability company with the single purpose of holding the trademark. The LLC can also be prevented from incurring debt, which greatly reduces the risk of a bankruptcy filing. One last alternative is for the licensee to take a security interest in the trademark, but this is not commonly used as it creates disincentives for both parties. While there are additional drafting techniques one should adopt, such as explicitly referencing Bankruptcy Law protections, combining trademarks in the same agreement as other protected intellectual property, and paying royalties over time, anyone considering entering into a trademark licensing agreement should enlist the services of an attorney to make sure their rights are protected.

Legal Update - January 2016 Newsletter

David Lloyd - Tuesday, January 05, 2016

Dear valued clients and supporters: Happy New Year. This month's newsletter will focus on: (1) The effect bankruptcy of a trademark licensor has on a licensee; (2) The limits on non-compete clauses; and (3) The emergence of "The Internet of Things" and its legal impact.

When a Trademark Licensor Goes Bankrupt
Businesses sometimes enter into licensing agreements to use a trademark belonging to someone else. One of the most essential circumstances to consider before expending any resources on a trademark license is what happens in the event that the owner of the trademark declares bankruptcy. For businesses that develop products, perform research, and make sales revolving around a trademark license, savvy planning in advance is essential for protecting their interests. Poor planning or a failure to do so can result in the license being revoked, even if paid for in advance, resulting in the potential failure of licensee's business. A more in-depth article on this issue is now available here on our website.

 

Grounds for Refusing to Enforce a Non-Compete
In New York, non-compete clauses must be necessary to protect a legitimate interest of an employer, and must be reasonable in scope, duration, and location. Non-compete clauses are generally disfavored as restraints on trade and will only be enforced if signed for adequate consideration - i.e. in exchange for something. In a recent commercial court case involving three former executives of a Suffolk County-based vitamin distributor, NBTY, the judge addressed the validity of a non-compete clause signed after the executives were already employed. Years after being hired, the executives signed a stock option agreement containing a clause prohibiting them from working for any competitor in North America, Europe, or China for one year. The executives all then resigned and began working for a competitor without exercising the stock options.

The court held that the non-compete clause was not supported by new consideration and therefore unenforceable because the executives had chosen resigning over exercising their options. By forfeiting their right to any benefit under the stock option agreement, they rendered the non-compete clause invalid. Additionally, the court found that the geographic scope was unreasonable, noting that such a global restriction was only generally appropriate when a business is sold. Finally, the court rejected the argument that the executives would inevitably misappropriate confidential information, requiring more than hypothetical speculation to form the basis of such a claim.

This case highlights how employers who wish to hold their employees to non-compete clauses must be careful in tailoring their restrictions not only so that they are reasonable and necessary, but also so that they are in exchange for adequate consideration.

 

The "Internet of Things"
The Internet of Things refers to the everyday objects people use - smart phones, smart watches, smart cars, and even smart homes - that are digitally interconnected and function through a computer network that transmits and analyzes high levels of data. These "things" can be typically controlled and/or accessed remotely, and the new digitized "ecosystem" of which they are a part allows for automation, constant monitoring, and instant access to seemingly endless information. Any single device can be composed of parts made by multiple manufacturers, require a local "gateway" through which it connects to a greater network and other devices, and function through a cloud computing platform. While consumers and businesses alike enjoy the increased functionality the Internet of Things provides, the ever-expanding network of devices, systems, subsystems, clouds, and people has created a whole universe of legal considerations.

 

For one, with such vast access to and exchanges of data, participants in the Internet of Things must take steps to protect the privacy of personally identifiable information. Additionally, other data, such as sensitive or secret information, and control over a computer network, must also be heavily protected, making cybersecurity paramount. Other potential sources of intense litigation will be over the ownership of the various data generated by the Internet of Things, the ownership of the underlying technology/processes on which it all functions, and as well as accusations of anti-trust violations. Finally, when things go wrong and devices malfunction, break, and/or injure a user, with all the potential parties involved, determining whom to hold liable will be a complicated matter. All of this inevitably will result in an increase of rules, laws, and regulations governing the Internet of Things as it develops, and any supplier, manufacturer, or participant should consult with an attorney about potential liabilities before injecting a product into this emerging ecosystem.

Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on this and other issues throughout the month.

 

Business Owners May Be Liable for Business Debts and Transactions Through the Alter-Ego Doctrine

Erin Lloyd - Thursday, December 03, 2015

The chief purpose of forming a corporate entity is to protect the business owner’s personal assets. Incorporation protects these individuals from being held personally liable for their company’s debts and obligations. However, the use of corporate form is a privilege, and abuse of its protections can have serious consequences.

For example, when a corporate entity is so dominated by an individual that it primarily transacts the individual’s business instead of its own, it will be called the individual’s alter-ego and the corporate form will be disregarded to achieve an equitable result, Rohmer Associates v. Rohmer, 36 A.D.3d 990 (3rd Dept. 2007).

In order to prevail on an alter-ego claim, a plaintiff must establish that there was such a “unity of interest and control” between the individual defendant and the entity, or between two entities, that they cannot really be said to be separate. See Rohmer Assoc. Inc. v. Rohmer, 830 N.Y.S.2d 356, at *1 (App. Div. 2007). An alter-ego determination by a court does not technically make one entity vicariously liable for the debts of another. Rather, it results in disregarding the separateness of the entities as a legal fiction and treats them as one in the same entity for all purposes. This is applied to limited liability companies as well as traditional corporations.

“Alter-Ego” Liability Does Not Require a Showing of Fraud

It is not necessary to allege or prove fraud in order to pierce the corporate veil under the alter-ego theory. What is required is proof that a corporation is being used by an individual to accomplish his own and not the corporation’s business, and that the business owner’s control is being used to perpetrate a wrongful or unjust act. The question is whether the corporation is being used as a “shell” by the individual business owner to advance his own purely personal interests at the expense of another party, typically a judgment creditor, Port Chester Electrical Construction Corp. v. Atlas, 40 N.Y.2d 652 (1976). In making an alter-ego determination, a court is concerned with reality and not form. Wajilam Exports v. ATL Shipping, 475 F.Supp.2d 275 (S.D.N.Y. 2006). The focus is on the actual conduct of the dominating business owner and the impact of that conduct on innocent parties such as judgment creditors.

New York Courts Evaluate a Number of Different Factors

The factors relied upon by New York’s courts in applying the alter-ego theory include the use of alleged corporate funds for personal purposes, commingling corporate and personal funds, shuttling funds between personal and corporate accounts, the use of common telephone numbers and office space, using the corporation as a “shell” to advance personal rather than corporate interests, and otherwise abusing the corporate form.

When the use of an incorporation entity privilege of is abused, business owners may be held liable through the alter-ego doctrine in the State of New York. As with any legal transaction matter, individuals are encouraged to consult with an attorney before taking any official action, as every situation is unique and should be independently analyzed.

For more information, business owners can contact us here


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