Corporate Finance Law Blog : Corporate Finance Lawyer & Attorney : Davis Wright Tremaine Law Firm

By Holly M. Hearn and Rebecca L. Olson

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By Dipa N. Sudra

Failure to comply with COBRA and other health and welfare plan rules can trigger heavy excise tax penalties. In the past, those penalties were rarely assessed and employers could quietly fix their own problems. Now, however, you may have to report your own problems and assess these taxes on yourself.

On Sept. 8, 2009, the Internal Revenue Service (IRS) issued final regulations regarding new reporting requirements. Starting in 2010, employers (and certain third parties) must self-report and pay excise taxes for failing to comply with the following:

1. COBRA
2. HIPAA portability, access, renewability and nondiscrimination rules
3. The Genetic Information Nondiscrimination Act (GINA)
4. Mental health parity rules
5. Minimum hospital stays under the Newborns’ and Mothers’ Health Protection Act
6. Continued group health plan coverage of postsecondary dependent children on a medically necessary leave of absence under Michelle’s Law
7. Health savings account (HSA) comparable employer contributions rules
8. Archer medical savings account (MSA) comparable employer contributions rules

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By Jeni L. Meyer

Public employers may need to amend executive compensation agreements and plans prior to Dec. 31, 2009, to preserve the deductibility of performance-based compensation.

In Revenue Ruling 2008-13 (the “Ruling”), the IRS confirmed its earlier position that a plan or agreement that provides for payment following an executive’s termination without cause, for good reason or upon retirement will not qualify as deductible performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), regardless of whether the performance goals are satisfied.

As a result, this compensation will not be deductible if it exceeds the $1 million deduction limit. The Ruling provides relief for certain existing plans, as discussed in more detail in this advisory. Public companies should evaluate their plans as soon as possible to determine compliance.

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By Elizabeth J. Deckman, Jeff Belfiglio, Stuart Harris and Holly Wylam Klein

On March 19, 2009, the Department of Labor issued four new model COBRA notices designed to help employers satisfy their new COBRA notice obligations under the American Recovery and Reinvestment Act. Under the Act, certain persons who lost health care coverage as a result of an involuntary termination of employment are entitled to a subsidy of 65 percent of the employee's cost of COBRA coverage.

(For more information regarding the Act and the COBRA subsidy, please refer to our Feb. 24, 2009, advisory bulletin, “New COBRA Rules Require Prompt Action.” In addition, for your convenience, we've included a sound file of a Davis Wright Tremaine teleseminar, “How Will New COBRA Rules Affect You?” held on March 12, 2009.) Continue reading...

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Potential impacts and recommended responses

By Anne E. Denecke, Michael Reiss, Weldon H. Latham, John M. Bryson II and Angela Hart-Edwards

President Obama chose the Lilly Ledbetter Fair Pay Act of 2009 (“Fair Pay Act”) as the first law he signed after taking the oath of office, noting that its purpose was “to ensure fundamental fairness for American workers.” The Fair Pay Act overturns a 2007 U.S. Supreme Court decision holding that a female employee's Title VII sex discrimination complaint based on unequal pay was barred for failure to file with the Equal Employment Opportunity Commission (EEOC) within 180 days of the employer's discriminatory action that led to the pay differential.

The Fair Pay Act essentially confirmed Ms. Ledbetter's argument to the Supreme Court in Ledbetter v. Goodyear Tire, 550 U.S. 618 (2007) and the law in nine of 10 Circuit Courts of Appeal, as well as the EEOC's long-standing position, that the 180-day period for filing an EEOC charge (300 days in states with an antidiscrimination agency) begins anew each time discriminatory compensation is paid as a result of earlier discriminatory conduct.

Employers must take note of this development and ensure that their practices and policies promote a workplace free of discrimination, not only in compensation, but all other employee-related areas. This Advisory provides an overview of the Fair Pay Act's potential impact on employers and some steps employers can take to improve fairness and consistency while protecting themselves against older claims.
Continue reading...

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By Greg K. Hitchcock and Jenna L. Mooney

Oregon employers should be aware that when they deduct amounts from an employee's wages they have only seven days to pay the withheld amounts to the employee's intended recipient, unless the employee agrees to another deadline. This "seven-day rule," a little-noticed provision passed by the Oregon Legislature in 2007, applies to deductions for things such as charitable contributions, union dues, parking and transit, day care and certain insurance plans. The seven-day rule also applies to required deductions without another specified time for payment such as child support. The penalties are potentially severe for failing to satisfy this new requirement, which first became effective in 2008. Continue reading...

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By Aaron A. Roblan and April L. Weaver

Since President Obama took office nearly one month ago, the nation has been steadfastly focused on the economic stimulus package signed into law on Tuesday of this week. However, administration officials and President Obama have not lost sight of another major item on their agenda, a stimulus package for organized labor. In the first month alone, President Obama has signed four pro-labor executive orders and signaled a desire to receive the Employee Free Choice Act on his desk without delay. Because the impact of these orders will be profound, it is critical that employers fully understand their implications and review their programs accordingly. Continue reading...

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By Weldon H. Latham, John M. Bryson II and Angela Hart-Edwards 

President Obama chose the Lilly Ledbetter Fair Pay Act of 2009 (“Fair Pay Act”) as the first law he signed after taking the oath of office, noting that its purpose was “to ensure fundamental fairness for American workers.” The Fair Pay Act overturns a 2007 U.S. Supreme Court decision holding that a female employee's Title VII sex discrimination complaint based on unequal pay was barred for failure to file with the Equal Employment Opportunity Commission (“EEOC”) within 180 days of the employer's discriminatory action that led to the pay differential. The Fair Pay Act essentially confirmed Ms. Ledbetter's argument to the Supreme Court in Ledbetter v. Goodyear Tire, 550 U.S. 618 (2007) and the law in nine of ten Circuit Courts of Appeal, as well as the EEOC's long-standing position, that the 180-day period for filing an EEOC charge (300 days in states with an antidiscrimination agency) begins anew each time discriminatory compensation is paid as a result of earlier discriminatory conduct. Continue reading...

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By Ron Cai, Vincent Wang and Kevin Moore

For many enterprises, an important first step in establishing a China presence is to bring in experienced overseas staff. This advisory describes the procedure and documentation required for expat employees to obtain work visas, and outlines the scope of China's expatriate employment policy. Continue reading...

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August 13, 2008

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By Jennifer L. Brockett, Stuart W. Miller, John P. LeCrone and Emilio Gonzalez

California's Supreme Court, in the recent case of Edwards v. Arthur Anderson LLP, has affirmed California's long-standing ban on noncompete agreements and explicitly extended it to so-called “nonsolicitation” provisions, as well. The Court ruled that noncompetition and nonsolicitation clauses are void in California, unless they fall within a statutory exception, such as agreements involving the sale of a business or shares of stock in a corporation. The Court also found that an employer that requires employees to sign an agreement containing such a clause may commit an unlawful business practice subject to tort damages. Continue reading...

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Employers gain flexibility in meal and rest periods,
“off-the-clock” work

By John P. LeCrone and Janet Grumer
July 2008

Employers in California finally have some help navigating the state's complicated (and often costly) meal and rest period and timekeeping statutes and regulations. On July 22, 2008, the California Court of Appeal issued a comprehensive decision in Brinker Restaurant Corporation v. Superior Court, a wage hour class action alleging meal and rest period and “off-the-clock” violations by Brinker Restaurant Corporation.

Although this decision giving employers greater flexibility could be reversed, it establishes prevailing California law for the near term. California employers should embrace the ruling, which is summarized in this advisory, and take the initiative now to ensure they are in compliance.

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February 25, 2008

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By Christopher R. Helm

Effective Dec. 26, 2007, employers are now required to use the revised Employment Eligibility Verification Form (I-9) for new employees or to re-verify an existing employee's identity and employment eligibility. Along with the I-9 form, USCIS has also revised the list of acceptable documents to show identity, employment authorization, or both. For more information, please see our prior advisory on this subject. In addition, you are advised to conduct periodic self-audits to ensure that your I-9 documentation is in good order. U.S. Immigration and Customs Enforcement (USICE) is expected to heighten its enforcement efforts, particularly against those employers it suspects of knowingly hiring workers with improper documents.  

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By Minh Phung Ngo, Richard M. Rawson, Christopher R. Helm and James M. Mei

On Nov. 7, 2007, U.S. Citizenship and Immigration Services (USCIS) released a revised Employment Eligibility Verification Form (I-9). The revised Form I-9 will become effective once the notice is published in the Federal Register. USCIS, however, encourages employers to start using the revised Form I-9 immediately. The new form removes five documents from List A of Acceptable Documents. These documents are:

• Certificate of U.S. Citizenship (Form N-560 or N-561)
  
  
• Certificate of Naturalization (Form N-550 or N-570)
  
  
• Alien Registration Receipt (I-151)
  
  
• Unexpired Reentry Permit (Form I-327)
  
  
• Unexpired Refugee Travel Document (Form-571)

The revision brings Form I-9 into compliance with the 1997 rule that had eliminated the above documents as acceptable documents for proof of both identity and employment eligibility. In addition, instructions for Section 1 of the revised Form I-9 now expressly state that providing an employee's social security number in Section 1 is voluntary, unless the employer participates in E-Verify.

Employers do not need to complete the revised Form I-9 for existing employees. Employers only need use the new form when verifying the employment eligibility of new employees and when re-verifying existing employees. After the effective date, all previous versions of Form I-9, in English and Spanish, will no longer be valid. Employers who continue to use the outdated editions of Form I-9 after the effective date may be subject to fines and penalties.

The revised Form I-9, as well the "Handbook for Employers, Instructions for Completing the Form I-9,” are available online at www.uscis.gov. To order the new forms, you may call USCIS at 1-800-870-3676.

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This summer, the Oregon legislature again showed its anti-business bias by enacting several changes in Oregon’s employment law that will adversely Oregon employers and out of state employers with employees in Oregon. The changes are effective January 1, 2008 and include the following:

• voids an arbitration agreement between an employer and an employee unless the employer notifies the employee in writing at least two weeks prior to the beginning of employment that the employee will be required to enter into an arbitration agreement (ORS. 36.620); and
  
• makes non-competition agreements voidable unless the employer informs the employee, in writing and at least two weeks before employment begins, that a non-competition agreement is required. Additionally, only “white collar” exempt employees may be required to enter into non-compete agreements, and the employee must have access to trade secrets or other confidential business information. A non-competition agreement is only available for an employee who earns more than the median income for a family of four, which is now approximately $60,000, and the agreement may not exceed two (2) years from the date of the employee’s termination (ORS 653.295). 
  

These changes are effective for agreements entered into on or after January 1, 2008.
Employers located in Oregon, employers with employees working in Oregon and those contemplating acquiring, starting or re-locating an Oregon business should take heed. These changes will make it more difficult for employers to protect their legitimate business interests and reinforce Oregon’s label as a difficult place to do business.

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