Federal lawsuits might become less burdensome

“Discovery” is the phase of a lawsuit before trial in which the two sides have a right to demand relevant information from each other. Sometimes, big companies suing little companies try to “bury” the little company with endless requests for information, hoping to find some stray helpful tidbit or simply pressure the little company to settle to avoid the burden and expense.

But starting in 2016, the federal court rules have been changed to limit this tactic. The rules now say that discovery must be “proportional” to the needs of the case – taking into account the issues, the amount of money at stake, the importance of the information, the parties’ resources, and the burden involved.

This could make it easier to convince a court (at least in a federal case) that the other side’s endless requests for information are out of proportion and should be stopped.

When is a competitor’s name too similar to yours?

This can be a tricky question, because it often turns on whether the public is likely to actually be confused.

In one recent case, a California company called White Oak Vineyard & Winery brought a lawsuit against a Florida vodka distiller called White Oak Spirits.

The vodka company argued that wine and vodka are different products, and that no one would be confused by the two names, especially since White Oak Vineyard was not a nationally known brand. [Read more…]

Federal contractors must provide paid sick leave

Starting in 2017, companies that have federal contracts must allow employees to earn up to seven paid sick days per year, under an executive order signed by President Obama.

Employees can earn one sick day for each 30 hours worked, up to seven days per year. These days carry over from one year to the next, although an employee who quits or is fired without using them doesn’t have to be compensated for them.

Sick leave can be taken for an employee’s own illness, or to take care of a sick family member. It can also be used to deal with domestic violence, stalking or assault. [Read more…]

Business gets salary back from ‘disloyal’ employee

Did you know that executives and other employees may have a legal obligation to be “loyal” to their companies? This means that they have to act in the company’s interest, and not deliberately harm the company or take advantage of it for their own interest.

This came up in a recent New Jersey case where a timeshare company hired a COO who made $500,000 a year.

The company eventually fired the COO, claiming that he had exposed the company to potential liability by forging timeshare owners’ signatures on legal documents, misrepresenting the status of independent contractors, and sexually harassing two women. [Read more…]

Company can’t require workers to buy its merchandise

The Abercrombie & Fitch clothing chain cannot require its salespeople to buy and wear Abercrombie & Fitch clothes in order to work there, says a federal court in California.

The court okayed a class-action lawsuit on behalf of 62,000 Abercrombie employees in the state, based on the claim that the company’s “look policy” required them to buy Abercrombie clothes – and then buy new Abercrombie clothes every time the company issued a new sales guide.

The “look policy” did contain a disclaimer saying that “Abercrombie employees are not required to purchase Abercrombie clothing.” But the workers who brought the lawsuit claimed that this disclaimer was ignored in practice, and that salespeople who didn’t wear Abercrombie clothes were fired, given reduced hours, or sent home to change. [Read more…]

Clicking or e-mailing can create a binding contract

A New York company ran a loan-application website. As part of the application process, users had to click a box to get from one screen to the next. Above the box it said, “Clicking the box below constitutes your acceptance of … the borrower registration agreement.”

The borrower registration agreement wasn’t on the page, but the words “borrower registration agreement” were a hyperlink to another page that included the complete contract. In fine print, the contract said that disappointed borrowers couldn’t sue in court and had to take all claims to arbitration.

Was this binding? [Read more…]

Here’s a problem with employee arbitration clauses

A software company called TIBCO tried to protect itself by including a non-compete clause in its employment agreements. It also required that any disputes over the employment relationship go to arbitration rather than being tried in court.

When an employee left to work for a competitor, TIBCO filed a lawsuit and asked for an emergency injunction so it could immediately stop the employee from competing against it.

But the court said – surprise! – that it couldn’t issue an injunction because, under the terms of the company’s own contract,  the dispute had to go to arbitration. [Read more…]

What can you do if a competitor lies in its ads?

Your competitor’s advertising makes false claims about how great its products are – or worse yet, disparages your own products. What are your options?

You have a range of alternatives, from complaining to a private or government agency to filing a lawsuit. Here’s a look at some of the choices.

If your competitor is saying things it shouldn’t, the simplest approach is to complain to the Better Business Bureau’s National Advertising Division, or NAD. The NAD has been around since 1971 and has adjudicated some 5,000 disputes over whether advertising was fair and accurate. [Read more…]

Worker fired for medical marijuana use

A Colorado company could fire an employee who tested positive for marijuana use even though he used the drug for medical purposes, and even though marijuana is legal under state law, the Colorado Supreme Court recently decided.

The employee sued under Colorado’s “lifestyle law,” which prohibits businesses from disciplining employees for lawful activities done on their own time.

But the court said that because marijuana use is still illegal under federal law, the “lifestyle law” didn’t apply. [Read more…]

Are commissioned employees entitled to overtime?

The C&C Salon company recently agreed to pay $800,000 to a group of hairstylists in New York, New Jersey and Connecticut who claimed they had been denied overtime pay. The salon company had originally argued that the stylists were commissioned salespeople and therefore were not entitled to overtime, but a federal judge approved the settlement and said it was fair.

The case is not at all unusual – many businesses believe that commissioned salespeople are not entitled to overtime. And in fact, the rules can be a little hard to follow.

So, when exactly can a salesperson collect both a commission and overtime pay? [Read more…]

Businesses must investigate harassment even if they’re skeptical

A company has a legal obligation to investigate all claims of harassment fairly and objectively – even if the company is initially skeptical and thinks the claim is bogus.

That’s the upshot of a recent case involving a Massachusetts hospital.

Michael Saxe was a security guard who claimed he was sexually harassed at work by a female co-worker after he declined to get involved with her. He complained to his boss, and the hospital’s HR director conducted an investigation. [Read more…]

Company in trouble for confusing timekeeping system

Donna Vitali, a bookkeeper at a property management firm, was supposed to get a paid hour-long lunch break every day. In reality, though, she frequently felt pressure to work through her lunch break.

While Donna’s work during lunch breaks didn’t automatically qualify as overtime, it counted toward the 40-hour threshold above which hourly employees have to be paid time and a half. So it mattered whether her work during the lunch breaks was tracked.

In this case, the company had an electronic timekeeping system. However, it was apparently very confusing, and had no clear way to capture time spent by employees working during a paid lunch break. Donna’s attempts to resolve the issue with the payroll department went nowhere. [Read more…]

Employee can’t be fired for gossip about possible layoff

LaDonna George drove a route for a vending machine company. She requested several days off the week after her father’s funeral. When the company denied her request, she became emotional, scrawled a note to the employer and left.

When she returned the following week, she mentioned to a fellow driver, Steve Boros, that she had seen an online job posting for a route driver. She wondered aloud to Steve whether their employer had placed the ad because it was about to fire one of its drivers.

Steve, believing he was about to be fired, approached the employer about it. The employer responded by firing LaDonna, for (among other things) spreading gossip and suggesting to other workers they were about to be fired. [Read more…]

Contractors, temps may have more rights

Businesses often go to great lengths to avoid treating certain workers as “employees.” After all, employees are typically entitled to benefits, minimum wage and overtime, workers’ compensation, and unemployment insurance. They can sue for discrimination or other misdeeds. And they can unionize.

Increasingly, though, the federal government and the courts are saying that more workers should be considered “employees,” whether employers like it or not.

For instance, the U.S. Department of Labor recently issued a new policy guidance warning that large numbers of workers who are treated as independent contractors or consultants are actually employees. The guidance makes clear that workers can’t legally be treated as contractors unless they are truly in business for themselves and are not dependent on the employer. [Read more…]

Living rent-free didn’t increase child support payments

Even though a woman was living with her mother and got free room and board, the value of what she received wasn’t “income” in deciding how much child support she had to pay, the Virginia Court of Appeals recently decided.

The husband had primary custody of the couple’s children, while the wife paid support. The husband argued that the wife was effectively saving $1,200 a month by living with her mother, based on what she was paying in living expenses before she moved in with her. He argued that this $1,200 should be added to her “income” in calculating her child support bill.

But the court said that the wife’s rent-free living arrangement wasn’t “income” unless she was receiving it in exchange for providing services to the mother, which apparently wasn’t the case. [Read more…]

Couple weren’t ‘separated’ if they still lived together

A wife decided that her marriage was over in 2006, but she didn’t actually move out of the house she shared with her husband until 2011. So does she have to share the assets she acquired between 2006 and 2011 with her husband?

Yes, according to the California Supreme Court.

This is an important issue, because many couples continue to live together for some time after their marriage is effectively over. They may do this to minimize the impact of a separation on the children, or because they’re not ready to announce to the world that their marriage has ended. Often, the reason is economic – one spouse simply can’t afford to move out. [Read more…]

Facebook page becomes weapon in custody battle

Social media sites are among the latest weapons that spouses are using to gain leverage in divorce and custody battles. A recent case from New York illustrates how.

A father who was fighting for custody of a four-year-old boy went to court with details from his wife’s Facebook page. The page was full of photos and status updates showing her sightseeing in Italy and eating seafood in Boston, which the father used to claim that she was frequently traveling out-of-state while he was busy raising their son.

The mother objected, arguing that the court shouldn’t be able to look at the profile because she kept it private and because she had “unfriended” her husband before they separated. [Read more…]

Child stays in daycare, not with family members

Some people might assume that it’s always better for a small child to be raised by family members, such as grandparents, rather than being in daycare. But a Pennsylvania appeals court recently awarded custody to a father, even though it meant the child would spend a lot of time in daycare instead of with the mother’s parents.

In this case, the wife’s parents lived in the couple’s home. When the couple had a child, the wife’s mother became the primary caretaker.

Conflict soon broke out over the wife’s parents’ alleged attempt to keep the husband from bonding with his new child. As a result, the couple agreed that the grandparents would move out, and they did. [Read more…]

Spendthrift trust is divided at divorce

A “spendthrift trust” is a trust that is set up to provide children or others with income while protecting them from potentially poor spending decisions. The donor who creates the trust gives a trustee – often a family member, lawyer or financial advisor – authority to decide how often to distribute the trust assets, usually with some guidelines from the donor as to acceptable uses of the money.

Spendthrift trusts protect the beneficiaries from impulsively wasting the assets. They can also protect beneficiaries by making it harder for creditors to collect the assets if a beneficiary has a business failure, lawsuit, or divorce.

But while a spendthrift trust can often protect assets in a divorce, it isn’t always foolproof, as a recent Massachusetts case shows. [Read more…]

School bus must go to both parents’ homes

A school bus must pick up and drop off children at both of their divorced parents’ homes, the Pennsylvania Supreme Court recently decided.

In this case, the father and mother shared legal custody of their daughter, alternating on a weekly basis.

Until 2010, the school district had provided bus transportation to both homes. But that year, in order to cut costs, the district announced that it would only bus students to one location. As a result, the school would only bus the girl to and from her mother’s home, since her mother’s address was listed on the school paperwork. [Read more…]

More grandparents seek visitation

It’s natural for grandparents to want to be a part of their grandchildren’s lives. But in some families, hard feelings can develop, and one or both parents may decide to exclude grandparents from seeing the children. Do grandparents have a right to go to court and demand “visitation”?

That’s a very difficult question, and the answer depends a great deal on the state where everyone lives and particularly on the specific family circumstances. But it’s a question that’s coming up more and more often, as grandparents – and in some cases, other family members – try to use the court system to gain visiting rights.

This issue frequently arises where there has been a divorce, and the parent who gets custody wants to limit the children’s exposure to the other parent’s family. The issue can also come up when one parent passes away, and the surviving parent doesn’t get along with his or her in-laws. [Read more…]

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New tax break for rich unmarried homeowners

You can deduct your mortgage interest on your income taxes, but there’s a limit – you can only deduct the interest on up to $1 million of mortgage debt used to buy the property, plus $100,000 in home equity loans.

In a recent California case, a wealthy unmarried couple jointly owned a home that had a $2 million mortgage. They got into a dispute with the IRS over whether the $1 million limit applied to them jointly or individually.

The U.S. Tax Court initially sided with the IRS, and said the $1 million limit applied per home. But a federal appeals court in San Francisco overruled that decision. It said the $1 million limit applied per taxpayer, at least where the two taxpayers weren’t married. Therefore, the couple could deduct the interest on the entire $2 million mortgage. [Read more…]

Be careful with ‘expense clauses’ in commercial leases

It’s common in commercial leases for the tenant to pay a portion of the landlord’s property taxes and other expenses incurred in maintaining the property. Typically, the tenant’s portion is calculated as a pro-rata share, based on how much space in the building the tenant occupies.

But be careful: This pro-rata share can be calculated in two ways – as a percentage of the leased space in the building, or as a percentage of the leasable space in the building.

The “leasable space” method is better for the tenant. If a building has 100,000 square feet, and the tenant occupies 5,000 square feet, the tenant will pay 5% of the total expenses, no matter how much of the rest of the building is vacant. [Read more…]

Extended family may help with a mortgage

People who live with members of their extended family – or have boarders living with them – may have an easier time getting a mortgage, under new rules from Fannie Mae.

Previously, if you applied for a mortgage, only your own income could be counted to see if you qualified, even if you had family members or others living with you who contributed to your housing payments on a regular basis.

Now, however, under Fannie Mae’s “HomeReady” program, the income of extended family members who live with you can be considered on your mortgage application – even if the family members don’t sign the loan and aren’t legally responsible for the payments. [Read more…]

More homes are being sold ‘rent-to-own’

A growing number of homes are being sold on a “rent-to-own” basis.

Here’s how it works: The potential buyer agrees to lease the home for a period of time, usually two years. The buyer also puts down a deposit (often called an “option consideration”), which is typically two to three percent of the home’s market value. At the end of the lease term, if the buyer decides to purchase the property, the deposit is credited toward the purchase price. If the buyer changes his or her mind, the seller keeps the deposit.

A typical agreement doesn’t set out the future purchase price in stone, but instead says that the current market value will be adjusted according to some measure that reflects the general trend of real estate prices in the area. [Read more…]

Deducting your home office can affect you when you sell

If you work at home, the home office deduction can be a great way to turn part of your house into a tax break. But you should be aware that it can also trigger a tax bill when you sell the property.

Here’s some background on how the deduction works, and how it affects home sales:

The deduction is available if you have a space in your home that you use regularly and exclusively for work. If you use a room for work only occasionally, or if you use it regularly for work but your children also do homework there in the evening, you probably don’t quality. You also wouldn’t qualify if you use the room to manage your investments but not to operate a business. [Read more…]

Are bad business debts a tax deduction?

If you’re in business long enough, you’ll run into a customer who doesn’t pay you. Despite your best efforts, you may conclude that you’ll never receive the money. Do you have a tax-deductible bad debt? The answer depends in part on whether you operate your business using the cash or accrual method of accounting.

Cash. When you use the cash method, you report taxable income when you receive it and deduct expenses when they are actually paid. While this makes your bookkeeping simple, you get no direct deduction for a bad debt. Since the income was never received, it was never reported or taxed. However, you will still be able to indirectly deduct the labor, merchandise, and overhead used to provide for the goods or services that were delivered but not paid for. [Read more…]

Keep up with section 179 depreciation changes

Did you know that a recent law made changes to the section 179 expensing election for 2016? These modifications took effect as of January 1. Here’s what to consider as you make asset purchasing decisions this year.

[Read more…]

Easy ways to ruin your credit score

Investor Warren Buffet once said, “It takes 20 years to build a reputation and five minutes to ruin it.” The same maxim applies to good credit. Stellar credit scores don’t happen overnight or by accident. Instead, you have to exercise financial discipline, sometimes for years. The reward: lenders who are willing to offer mortgages and car loans at favorable interest rates.

Unfortunately, like a good reputation, a strong credit score can easily be ruined. Here are three simple ways to devastate your credit score.

[Read more…]

Is your business using social media tools?

According to a recent survey by a technology company, email, websites, and social media are the top three digital marketing tools used by businesses. Lack of an online presence means your company may be missing opportunities to connect with customers. If you’re neglecting your internet marketing, consider outsourcing the task to a virtual assistant, or assigning an employee to handle website maintenance and social media accounts. Still feeling overwhelmed by the idea? Remember that online marketing is a complement to traditional methods of reaching customers. Start small. Even a basic website will help you engage, network, and interact. Let us know if we can help.

Start your midyear planning with these tax savers

As you get ready for midyear tax planning, keep these lesser-known tax breaks in mind.

Residential energy credit. You can claim a 10% energy credit for qualified improvements (up to a lifetime maximum of $500) when you improve your home with insulation, windows, and certain types of roofing. This credit is presently set to expire after 2016.

Commercial building energy deduction. The above-the-line deduction for energy efficiency improvements to lighting, heating, cooling, ventilation, and hot water systems in your commercial building is currently available through December 31, 2016. [Read more…]

Retiring abroad? Check your long-term care policy

If you’re thinking of retiring abroad, and you want to purchase (or have already purchased) long-term care insurance, be sure to read the fine print on your policy.

Not all policies cover care in other countries, and even if they do, the benefits are often reduced. For example, one large insurer pays only 50 percent of the nursing home benefit if your care is received outside the U.S. [Read more…]

Long-term care insurance deductions increased for 2016

The amount you can deduct on your taxes as a result of buying long-term care insurance has been increased by the IRS for 2016.

If you itemize your deductions, you can generally claim a deduction if your premiums, together with your other unreimbursed medical expenses, amount to more than 10% of your adjusted gross income (or 7.5% if you’re 65 or older). [Read more…]

Veterans face new limits on long-term care help

The U.S. Department of Veterans Affairs offers a pension benefit to low-income veterans (and their spouses) who are in a nursing home or who need help at home with everyday tasks such as dressing or bathing. The program is called “Aid and Attendance.”

Unfortunately for many veterans, the government recently proposed new regulations that will tighten the qualification rules and impose a look-back period and transfer penalties similar to those under Medicaid. As a result of these changes, anyone who might be eligible for Aid and Attendance should probably talk to a lawyer about how to proceed.

In the past, veterans or surviving spouses applying for Aid and Attendance had to meet certain asset limits. Different offices used different limits, but $80,000 worth of assets was a common ceiling above which benefits could be denied. However, a veteran or spouse could give away assets to family members in order to qualify, without penalty. [Read more…]

New technique to qualify for Medicaid more quickly

A recent court decision may make it easier for seniors to use short-term, immediate annuities to qualify for Medicaid more quickly.

In general, people who go to a nursing home must spend down their resources before becoming eligible for Medicaid. If you transfer your assets rather than spending them down (such as by making gifts to family members), that triggers a penalty period during which you’re ineligible for Medicaid benefits, even if you would otherwise qualify.

If one spouse goes into a nursing home, the other spouse is generally allowed to keep a certain amount of assets to live on. However, if a couple owns more than this “asset allowance,” they must spend down any additional assets before applying. [Read more…]

Major changes to Social Security may require taking action now

Two Social Security strategies that many married couples have been using to maximize their benefits are being eliminated, as a result of the federal budget deal that President Obama signed into law in November.

In the past, these strategies could be worth tens of thousands of dollars over a lifetime for some couples. The fact that they are being phased out means that many seniors should take action now, before the changes take effect, to reduce the impact. Other seniors may need to reconsider their long-term retirement plans.

The strategies that are being eliminated are: [Read more…]

Family trust could prohibit beneficiaries from going to court

People who set up trusts for children, grandchildren and other family members have a greater ability to limit the beneficiaries’ right to challenge trustees’ decisions in court, as a result of a new U.S. Tax Court decision.

Here’s the background: You may know that you can give up to $14,000 a year to any person without incurring the federal gift tax. But that rule generally doesn’t apply if you put the money in a trust for the person, because you’re not giving them the money directly – in legal terms, the person doesn’t have a “present interest” in the funds. So any such gift is potentially taxable.

So, how can you avoid this problem and put up to $14,000 a year into a trust without paying gift tax? A common solution is to put the money into a trust, but give the person 30 days in which he or she can withdraw the funds. Typically, beneficiaries won’t actually withdraw the money, because they’ll be afraid that if they do, no further contributions will be coming. But the 30-day window means the person has a “present interest” in the funds, and so you qualify to avoid the gift tax. [Read more…]

Many people miss a tax deduction for inherited IRAs

If you inherited a retirement account, and if the estate of the person you inherited it from owed an estate tax, you might be missing a big income tax deduction when you withdraw funds from the account. Many people forget to claim this deduction.

The deduction applies not only to inherited IRAs, but also to inherited 401(k) accounts, certain stock options and unpaid dividends, pretax gains in certain annuities, and some other assets.

The idea is that the IRA (or other asset) already triggered an estate tax for the person who died. So, taxing your withdrawals from the account amounts to taxing the same asset twice. The deduction exists to prevent this double taxation. [Read more…]

Avoid capital gains tax when selling investment property

Did you know that it may be possible to avoid paying immediate capital gains taxes when you sell an investment property? That’s true if you’re planning to sell the property and invest the proceeds in another property shortly afterward.

For instance, suppose you own a condo as an investment, and you plan to sell it and use the proceeds to buy another investment property. You might be able to treat the sale and the subsequent purchase as a “wash,” and defer paying any capital gains tax on the first property until you sell the second property.

This is known as a “like-kind exchange,” or sometimes as a “1031 exchange” (after the section of the tax code that allows this). [Read more…]

Interest rates are going up – what does this mean for your estate planning?

The Federal Reserve has begun raising interest rates. And while rates are still historically extremely low, they’re probably at the start of a long, gradual increase. As a result, you might want to consider some estate planning techniques now that benefit from very low rates … because an opportunity like this one might not come around again for many, many years.

Here are some ways to use the current low-rate environment to transfer assets to your heirs while avoiding estate and gift taxes:

Family loans. One idea is to loan money to a trust for your children, and then have the trust use it to make investments – or make a promising investment yourself, and then loan that asset to the trust. In return, you’ll get a promissory note in which the trust promises to repay the loan with interest. [Read more…]

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