Looking Through The Crystal Ball at Tax Reform

With every new administration comes a new approach to taxation and changes to deductions and credits.  The Trump administration has promised tax reform since the early campaign days, and his latest tax reform legislation does just that.  However, instead of highlighting what the legislation would alter if its adopted, this article focuses on what is likely to remain the same.   

With the latest administration in office, there may be changes to the tax breaks you have historically claimed on your tax returns.  While it's still unclear what tax laws will change, USA Today recently reported there are five tax breaks that remain unaltered in the current version of tax reform legislation:

  • Mortgage Interest Deduction
  • Charitable Contributions Deduction
  • IRA Contribution Deduction
  • Premium Tax Credit
  • HSA Contribution Deduction

Let’s take a more detailed look at each to get a better understanding of how you may be affected, relevance to the taxpayer, and how these deductions might help:

Mortgage Interest Deduction:  As its name reflects, the mortgage interest deduction is available to those who pay a mortgage and itemize their deductions.  While this deduction would not change, the proposed reforms to the tax laws may not leave enough itemized deductions intact to make itemization of deductions a viable option for most folks. Combine fewer deductions with raising the amount of the standard deduction, and relatively few taxpayers may bother itemizing under a revised system.  As a result, even though you might continue to qualify for a mortgage interest deduction, it may not make sense to take it because the standard deduction would be a better deal.

Charitable Contributions Deduction:  A certain percentage of charitable contributions are deductible under the current tax code and like the Mortgage Interest Deduction, this looks like it won’t change in the tax reform package.  Also like the mortgage interest deduction, charitable contributions are only available if you itemize your deductions.

IRA Contribution Deduction:  Contributions to IRAs are deductible under certain circumstances and at present, this non-itemized deduction would remain unchanged.

Premium Tax Credit:  Unsurprisingly, this credit is tied to the Affordable Care Act, which is very much unresolved at the present time.  This credit will still exist for low and moderate-income taxpayers who buy private health insurance, but changes are expected under the new plan. The proposed new version of the Premium Tax Credit would make it available to a wider range of income levels and the credit amount would increase with age, rather than with need. Additionally, the new premium tax credit won’t require taxpayers to buy health insurance policies on the ACA marketplace, as the current tax credit does.

HSA Contribution Deduction:  This is part of the tax reform plan that appears to be expanding in the healthcare reform package. If approved, annual contribution limits would increase to nearly double what they are right now. HSAs would become a payment option for every health insurance policy, instead of just for special HSA-enabled plans. Lastly, the healthcare reform package would expand what qualifies as medical expenses for the purposes of HSA spending.  If this tax reform legislation passes as-is, it would make sense to increase HSA contributions. 

No one has a crystal ball to determine exactly what will be changed with the tax reform.

Of interest – and certainly water cooler discussion – is how these changes will impact you as a taxpayer, and when the changes will become effective. The only certainty right now is that changes will come, and it’s important for you to be informed.


Source:  USA Today ‘5 tax breaks President Trump won't kill’

Kirk EsmondTax
STAY CONNECTED: Employment and Labor Law

NEWS that impacts your personnel policies and procedures

Kristin Ferrera

Kristin Ferrera


BREAKING NEWS:

WASHINGTON STATE SUPREME COURT ISSUES RULING ON CASE INVOLVING EMPLOYEES’ MISSED MEAL PERIODS

On June 29, 2017, the Washington State Supreme Court answered two questions certified from a federal district court in the case of Brady v. AutoZone Stores, Inc.

The Court answered the following certified questions as follows:

  1. Is an employer strictly liable under WAC 296-126-092? No. The employer is not automatically liable if a meal break is missed because the employee may waive the meal break under the regulation.
     
  2. If an employer is not strictly liable under WAC 296-126-092, does the employee carry the burden to prove that his employer did not permit the employee an opportunity to take a meaningful break as required by WAC 296-126-092? An employee asserting a meal break violation under WAC 296-126-092 can establish his or her prima facie case by providing evidence that he or she did not receive a timely meal break. The burden then shifts to the employer to rebut this by showing that in fact no violation occurred or that a valid waiver exists.

The opinion can be found at Courts.wa.gov

What does this mean to employers?

Employers may allow employees to waive their meal periods, but the employer may never coerce or force the employee to do so. Also, if you allow employees to waive their meal periods, then you should keep evidence of the waiver on file for at least three years to protect against liability for violations of WAC 296-126-092.  In practice this could be a written waiver signed by an employee either for a period of time or on a case by case basis.

Washington State’s Department of Labor and Industries has posted the following advice to employers:

Business owners please note: The Department of Labor & Industries recommends that you get a written statement from workers who want to give up their meal periods.”

Agricultural employers please note: The regulation for meal and rest periods for agricultural workers is different than that cited in the Bradycase. WAC 296-131-020 governs meal periods for agricultural workers and states that employees “shall receive a meal period…” as opposed to the nonagricultural regulation that states the employees “shall be allowed a meal period…”[emphasis added]. This could give way to the interpretation that while the nonagricultural meal period is waivable, the agricultural meal period cannot be waived.

If you have further questions about this, contact an attorney to assist you with implementing the proper policies and procedures for missed meal periods.


NEW LAW:

New Law Relating to Pregnancy Accommodations Effective on July 23, 2017

Effective July 23, 2017, Washington employers with 15 or more employees must provide reasonable accommodations to their pregnant employees and may not discriminate against pregnant employees on the basis that the employer will have to provide these accommodations.

The summary of the law is as follows:

It is an unfair practice for any employer to:

  • Fail or refuse to make reasonable accommodation for an employee for pregnancy, unless the employer can demonstrate that doing so would impose an undue hardship —undue hardship means an action requiring significant difficulty or expense;
  • Take adverse action against an employee who requests, declines, or uses an accommodation;
  • And deny employment opportunities to an otherwise qualified employee if the denial is based on the employer's need to make reasonable accommodation;

Reasonable accommodation means:

  • Providing more frequent, longer, or flexible restroom breaks;
  • Modifying a no food or drink policy;
  • Job restructuring, part-time or modified work schedules, reassignment to a vacant position, or acquiring or modifying equipment, devices, or an employee's work station;
  • Providing seating or allowing the employee to sit more frequently if the job requires standing;
  • Providing a temporary transfer to a less strenuous or hazardous position;
  • Providing assistance with manual labor and limits on lifting;
  • Scheduling flexibility for prenatal visits;
  • And any further accommodation an employee may request, and to which an employer must give reasonable consideration to in consultation with information provided by the Department of Labor and Industries or the attending health care provider.

An employer may not claim undue hardship or require written certification from an employee for:

  • Providing more frequent, longer, or flexible restroom breaks;
  • Modifying a no food or drink policy;
  • Or providing seating or allowing the employee to sit more frequently if the job requires standing.”

Learn more here: Final Bill Report SSB 5835

The full text of the law is here: Substitute Senate Bill 5835


IMPORTANT UPDATE:

OSHA Extends Deadline for Electronic Record-Keeping from July 1 to December 1, 2017

The U.S. Department of Labor, Occupational Safety & Health Administration (OSHA) is not currently accepting electronic submissions of injury and illness logs and has issued a proposed rulemaking to extend the July 1 deadline for certain employers to electronically submit such data to the agency for posting online.

Employers with 250 or more employees and those with 20-249 employees in certain industries with historically high rates of occupational injuries and illnesses (including agriculture, construction, and other industries, see full list here) must now submit certain 2016 injury and illness data from Form 300A electronically by December 1, 2017.

Although the extension is in the form of a proposed rulemaking, because OSHA is not accepting electronic submissions and the electronic reporting system will not be available until August 1, employers can assume the deadline has been extended at this time. OSHA describes the deadline extension as an opportunity for the new administration to review the reporting requirements and for employers to familiarize themselves with the electronic reporting system. Based on OSHA’s stated intention to also reconsider, revise, or remove other provisions of the prior final rule, employers should watch for further changes prior to the December 1, 2017, implementation date.

JDSA will continue to provide updates as changes occur.

Although the requirement to electronically report injury and illness information has been delayed, employers’ obligations to track and record workplace injuries and illnesses remain otherwise unchanged.


We’ll continue to keep you well informed of current and upcoming changes that impact you, and your business.

UPCOMING – In the coming weeks, we will post updates on the Third Washington State Legislative Session, and bills currently under consideration including paid family and medical leave, workplace bullying, and articles on the federal Department of Labor’s change in: policies regarding independent contractor classification and joint employer status.

The Cannabis Business: What You Need To Know Now!

A 90-minute presentation you don’t want to miss. 


By Lindsey J. Weidenbach

By Lindsey J. Weidenbach

The business of cannabis is big business. If you’re involved, you know the potential. But do you know—and understand—all the legal matters that come with operating in this emerging industry? If you don’t, you can gain a lot of knowledge in a short amount of time.

Producers, growers, and retailers can best grow their cannabis-industry business by knowing more about the laws and regulations governing this potentially lucrative industry.

JDSA Law is presenting a seminar on Cannabis in Central Washington on Tuesday, June 27, 2017. JDSA Law attorney, Lindsey Weidenbach, will lead this 90-minute early-evening event. Lindsey will focus on providing two key areas of information:

  • Changes happening in the cannabis industry
  • The issues cannabis businesses are experiencing in Central Washington

There are numerous areas of discussion surrounding the cannabis industry in Washington and Oregon - such as Consulting and Licensing Agreements, Retail License Expansion, Research, Industrial Hemp, Advertising, and others. And while the focus of this presentation will be on changes and related issues, the wealth of knowledge you can gain from Lindsey, and her presentation, could help make a significant difference in the overall success of your business.

In addition to the vital industry-related information you will receive in the seminar, attendees will also receive a $40.00 discount on the 50+ page Handbook, "Maintaining Compliant Business Practices in the Washington Cannabis Industry”, which she created, authored, and maintains to keep cannabis business owners current with the evolution of the cannabis industry.

This seminar is being presented at the Confluence Technology Center in Wenatchee from 5:30pm to 7:00pm. Limited seating is available. Attendance is $20.00.

Register by clicking here.

Lindsey Weidenbach began her practice in the cannabis industry, at its infancy, in 2013. She services over 30 cannabis industry-related clients (from producers to retailers) in varying stages of their business practices. Lindsey is licensed to practice and represent cannabis clients in the states of Washington and Oregon, and is currently being considered as a speaker at multiple national industry conferences in the months ahead.

Kirk EsmondCannabis
Another Door Closed: Real Estate Transactions in the Cannabis Industry

By Lindsey J. Weidenbach

By Lindsey J. Weidenbach

On April 18, 2017, national title companies such as Fidelity National Title Insurance Company, Chicago Title Insurance Company and Alamo Title Insurance received Underwriting Bulletin No. 2017-RC-04, closing yet another door to the cannabis industry: title & escrow.  The memorandum, states that if the title company receives any notice from the broker, seller, buyer or anyone else, that the Land is or will be used in some capacity for growing, producing, distribution or dispensing of any type of marijuana or marijuana products, the title company is not allowed to:

  1. Be involved in the handling of any escrow or other funds of any type
  2. Issue any type of zoning coverage
  3. Issue title insurance without the inclusion of an exception related to violation of federal law

We have been told that the possible reason for the  title companies’ sudden change of heart is because of Sean Spicer’s and the Attorney General’s comments on marijuana and the current administrations unpredictability as to the topic.  This fear of federal enforcement is often used as an excuse by national companies to discontinuing working with the cannabis industry. 

The cannabis industry has grown accustom to having to get creative in order to just retain some semblance of normalcy in business.   However, this new mandate from title & escrow affects folks who might want to purchase property and rent space to cannabis operations and thus applies to those with no tie to the industry, other than a something as simple as a lease. 

Typically, financial institutions acting as lenders will require that the purchase and sale be closed by a title company.  The borrower would have to negotiate a very unusual exception to close a bank-financed transaction outside of a title company.  The good news is that as long as the real estate transaction doesn’t involve bank financing, law firms with real estate experience and licensed Limited Practice Officers (LPO) can close real estate transactions.  At JDSA, we can draft the purchase and sale documents, coordinate title insurance with the title company, issue settlement statements and record the transfer documents, be it a deed or real estate contract. 

The cannabis industry once again must get creative in order to conduct normal business practices. 

Even though the title companies have suddenly determined that closing real estate transactions for land that may be used for cannabis growing, processing or retail sale is too risky, Law firms such as JDSA are equipped to close real estate transactions that do not involve bank financing.  JDSA is standing by the industry and will assist with creative solutions to the hurdles that are put in place. 

Kirk EsmondCannabis
Washington State Cannabis Laws: Change Has Arrived

Senate Bill 5131 Changes the Washington Cannabis Rules

By Lindsey J. Weidenbach

By Lindsey J. Weidenbach

On May 16, 2017, Washington State Governor Jay Inslee signed Senate Bill 5131 into law, initiating changes to the recreational and medical cannabis rules, which will become effective on July 23, 2017.  Below is summary of the changes and how they affect the cannabis industry moving forward.

1.     Consulting and Licensing Agreements.  SB 5131 expressly allows licensees to enter into agreements for consulting services and the licensing of intellectual property rights such as trademarks, trade secrets and trade names.  These agreements must be disclosed to the Washington State Liquor and Cannabis Board (the “WSLCB”) for approval.  Noticeably absent in the legislations is clarification as to whether or not these agreements have to conform to all other I-502 rules and regulations.  If not, SB 5131 assumedly would give licensees the ability to structure agreements so that the payment for consulting or licensing are tied to the licensee’s profits. 

2.      Purchasing Plants & Home Grows.  Qualifying medical cannabis card holders who are entered into the State’s database will be allowed to purchase immature plants and clones and may also purchase seeds for the purpose of growing cannabis at home.  The WSLCB will begin assessing the ability of recreational cannabis users to grow cannabis at home in light of the principals set forth in the Cole Memo.  

3.     Retail license expansion.  Currently, retail licensees and financiers can hold up to three licenses.  SB 5131 expands the retail license number to five licenses per person.  However, if you are unreasonably delayed in the licensing process, the WSLCB can forfeit the license application. 

4.     Marijuana Research.  The cannabis industry has been long attempting to conduct research on cannabis and its various strains, which was disallowed under the prior I-502 rules and regulations.  SB 5131 opens the door to marijuana research and instructs the WSLCB to begin structuring a process for the issuance of research licenses.  SB 5131 had a “companion bill” EHB 1857 which, in part, addressed research licenses.  EHB 1857 (sponsored by local representative Cary Condotta) is still in the committee phase. 

5.     Advertisements.  Cannabis licensees, especially retail licensees, are going to be restricted to the amount and the type of advertising that they can engage in after these new rules become effective.  The legislature found that cannabis billboards and other advertisements were targeting children, young adults and non-residents of Washington.  Therefore, licensees will now be disallowed from advertising anything other than: (i) trade name; (ii) location of the business; and (iii) the nature of the business.  The advertisement must be affixed to a building or other structure and “transport advertisements” are expressly disallowed.  Additionally, licensees cannot use a commercial mascot, toys, banners or inflatables to entice customers to come into their store.

6.     Industrial Hemp.  In 1938, the magazine Popular Mechanic published its February issue entitled “Billion-Dollar Crop” referring to industrial hemp for fiber, paper, dynamite and oil.  Hemp has similar qualities to the cannabis plant and was described within the definition of “marijuana” in the Controlled Substances Act (and other earlier legislation), making it illegal to grow.  Many speculate that hemp’s association with cannabis, and its subsequent status as an illegal substance, is due to the lobbying efforts of the timber industry which was threatened by the rise of hemp.  Under a new Section within SB 5131, the WSLCB is directed to come up with a regulatory framework for allowing industrial hemp to be grown in Washington State. 

7.     The Gift of Cannabis.  A lessor known fact of the prior I-502 rules is that gifting cannabis was still illegal.  The State will now allow gifts of small amounts of cannabis so long as the delivery is done in a nonpublic place and the cannabis is in its original packaging. 

8.     Organic Cannabis.  Many local farmers have been pushing for organic certification of cannabis for many years, and these farmers may soon get their wish.  Under SB 5131, the WSLCB may now adopt rules to certify cannabis as organic, both under the standards provided by the federal organic program and the Washington state organic program. 

9.     Tribal Land.  Licenses will not be issued if the premises is on tribal land or Indian country without the consent of the tribe or Indian country. 

10.  Inspections.  Under current I-502 rules, inspections by the WSLCB were triggered mostly by either changes to a licensee’s site or operating plan or by complaints of violations.  The new rules allow inspections for violations at any time and these inspections can result in fines for violations seen by the enforcement officer.  These fines will include reimbursement for the State’s costs in conducting the inspection plus $1,000.  These fines are in addition to the fines which already exist in the regulations, which include the forfeiture of the license, and SB 5131 allows the WSLCB to implement new fines for violations of the rules and regulations. 


The above is a summary of the main changes within SB 5131.  These changes will be effective as of July 23, 2017 and will not be retroactive.

Kirk EsmondCannabis
WORLD INTELLECTUAL PROPERTY DAY: The Value of Global Brands

Each year on April 26th the intellectual property community celebrates World Intellectual Property Day to recognize the role creation and innovation has played in our lives.  Intellectual property – ranging from patents and trademark to copyrights and trade secrets – has made our lives safer, more comfortable, and through innovation is turning problems into progress.

Trademarks, or “brands” as they are known in the advertising and marketing community, are the more familiar form of Intellectual Property that people interact with on a daily basis.  From the morning cup of Starbucks® coffee to the late-night snack from McDonald’s® our lives, our possessions, are an array of trademark choices often influenced by a trademark’s reputation.  As a brand grows in recognition and reputation so can its value and so it is appropriate on World Intellectual Property Day to not only recognize the world’s most valuable brands, but also to consider why trademarks are a valuable asset to any business.


The Most Valuable Brands of 2016:

Authorities differ on which brand was the most valuable in 2016, but there is a general consensus that certain brands consistently rank among the world’s best in reputation and value[1].  The following list from Forbes offers no surprises as to which companies have the most valuable global brands, but perhaps food for thought is the fact that something as simple as a trademark can be worth billions of dollars:

 

Source: Forbes


 

Why Trademarks are Valuable to Any Business:

No matter the size of a business, nor the goods and services it sells, its trademarks are likely to be the most valuable asset it has.  Even so, many businesses underestimate the potential value of their brands and how to get the most value out of a trademark.  Trademarks have a certain role to play in the business arena.  Knowing what that role is and then allowing a trademark to properly do its job could turn a new business enterprise into the next billion-dollar business world leader.

1.     Trademarks Relay Information to Consumers:

Trademarks are an efficient way to market your products to consumers.  They are source identifiers.  They tell consumers that here is the source of a certain product of a certain quality and reputation.  Trademarks help consumers find products among a sea of competing goods and the more distinctive and recognizable a trademark is, the more likely it will stand out from its competitors and influence a consumer’s choice of purchase.

Importantly, it is consumer experience that creates value or “good will” in a brand.  The more consumers learn that when buying a certain product, they will get a certain experience – good or bad – the more the reputation of the brand under which the product is sold grows. 

2.     Trademarks Can Efficiently Promote Your Products, and Enhance Business Reputation Through the Internet:

Many consumers use the Internet to search for information on products and services and typically do so by typing a brand name into the search engine.  The more a trademark is marketed and becomes known to consumers, and the more consumers search the Internet by using that trademark, the higher that trademark tends to appear in Internet rankings.  A higher ranking can in turn generate more traffic and greater consumer interest toward the trademark resulting in greater brand value.

3.     Trademarks Ensure Companies Don’t Lose Business to Competitors:

Trademark law is designed to protect consumers from becoming confused between products and from accidentally purchasing one product when they intended to purchase another.  The goal of a trademark is to prevent that confusion by being as distinctively different from competitors’ marks as possible.  Logically, no business wants to lose customers.  A business should, therefore, not only adopt trademarks that are distinctive, but also monitor the marketplace to make sure competitors are not appropriating customers by intentionally using a confusingly similar brand.

4.     Trademarks Can Enhance Employee Experience:

A brand’s reputation can have an effect on employees working under that brand.  If the brand has a good reputation, employees may feel more positively toward their jobs, and have a greater sense of pride in their work.  A more reputable brand is more likely to draw applicants for employment positions than a brand with a bad reputation.  A more reputable brand can create better business opportunities for the brand owner.

5.     The Billion Dollar Brands Were Initially Purchased for a Few Hundred Dollars:

An application for a federal trademark can be as little as $325; less for a state registration, and the fees to maintain a registration every five or ten years are only a couple of hundred dollars.[2]  Considering the value a good mark can add to a company, the cost to adopt, use and register a trademark is a bargain. 

Without a doubt, our lives are better today because society encourages innovation and creation, and recognizes the value of intellectual property.  As the world celebrates World Intellectual Property Day, take a look around and see how creation and innovation over the years have enhanced your life.


  [1] A brand’s value should not be confused with a company’s value.  A brand can be considered an asset entitled to its own entry on the company balance sheets.

[2] While the United State Patent and Trademark Office, and various State offices, have made applying for a trademark a fairly simple process, there are pitfalls and seeking legal advice from an Intellectual Property Attorney is recommended.

Washington Paid Sick Leave – Spring Update
Kristin M. Ferrera

Kristin M. Ferrera

Rita H Lovett

Rita H Lovett


As previously reported, Initiative 1433 was approved by Washington voters in the last statewide election, and as a result, Washington employers must permit certain employees to accrue at least one-hour paid sick leave for every forty hours worked beginning January 1, 2018.

The Washington State Department of Labor & Industries (“Department”) solicited feedback on the new law from interested stakeholders, and multiple employers and associations provided written comments on issues raised, as well as some proposed solutions. The Department has now issued draft proposed rules to implement the law, scheduled a meeting for Monday, April 24, 2017, 9:00 am – 11:00 am, to discuss the draft rules, and solicited further feedback. If you are interested in attending or calling into this Monday’s meeting, you can participate online, by phone, or in person.

Feedback to the Department’s draft rules is due April 28. The Department intends to revise the proposed rules based on this feedback, circulate an updated draft during the week of May 8th, and seek further stakeholder feedback by May 31. The Department will then draft administrative policies for the new law and hold public hearings throughout Washington this summer, with a final deadline for stakeholder comments on the proposed policies of September 1, 2017.

We will post a blog article, after the Department circulates updated rules in early May, to update you with the current status of the rules. You can find further information about the Department’s paid sick leave rule-making process, including the current draft proposed rules at: https://lni.us.engagementhq.com/.

There is still an opportunity to weigh in on these important rules.

If you have concerns about paid sick leave that are not addressed by the current draft rules, please provide comments to the Department or contact us so we can provide comments on your behalf.

 

L&I Meeting on Proposed Rules - April 24, 2017

Join WebEx Meeting Online:
Link: http://bit.ly/2pxK8JX
Meeting number (access code):  920 577 968
Meeting password: QKjJJU4W

Join by Phone:
1-877-668-4493 (Toll-free)
Meeting number (access code):  920 577 968

Meeting Location:
L&I Headquarters, Room S117
7273 Linderson Way SW, Tumwater, WA 98501-5414



Washington Minimum Wage Increase – Effective 1/1/17

This table shows the minimum wage increases for the next four years.

This table shows the minimum wage increases for the next four years.

On November 8, 2016, Washington voters passed Initiative 1433 to increase the state minimum wage beginning January 1, 2017.

Beginning on January 1, 2021 and each January 1 thereafter, the minimum wage will be adjusted, using the methodology that is set out in the statute.

Employers in industries with employees who receive tips, should be aware that tips and gratuities, and all service charges, except those itemized as not payable to employees servicing the customer cannot count toward the minimum hourly wage calculation for employees.

 

New Overtime Rules Not in Effect … Yet

The US Department of Labor’s (DOL) new regulations regarding overtime exemptions for executive, administrative, and professional employees (known as the “white-collar exemptions") were scheduled to take effect on December 1, 2016.  The regulations would have significantly increased the minimum salary threshold for employees to qualify for white collar exemptions.  Currently, salaried employees who make $455/week ($23,660 per year) or more, are exempt from overtime pay if they satisfy the duties test for one or more of the white collar exemptions.  The new DOL regulations, if permitted to take effect, will increase this salary threshold to $913/week, or $47,476/year.

On November 22, 2016, a federal district court in Texas issued a nationwide preliminary injunction which temporarily stops the DOL from implementing or enforcing most of the new overtime rule. What this means to you, the employer, is that you can continue to pay your exempt executive, administrative, and professional employees just as you have been, assuming they are properly classified as exempt under the current salary threshold and the duties test, until further court order.

DOL appealed the preliminary injunction to the Fifth Circuit Court of Appeals, which established an expedited briefing schedule that has spanned the inauguration and change in administration. In late January, sixty business groups and four states filed briefs in support of the injunction. It is unclear whether the new administration will continue to litigate the matter.

The Texas court’s decision temporarily blocks implementation of the proposed regulation, except for the provision increasing the minimum salary threshold for the Highly Compensated Employee (HCE) exemption. That increase, from $100,000 to $134,004, appears to have taken effect December 1, as planned, by virtue of its exclusion from the judge’s list of blocked regulations. While some suspect this may be a scrivener’s error and the court intended to block this provision along with the others, if you are relying on the HCE exemption, the most conservative approach would be to assume the salary threshold has increased, or consider whether one of the other white collar exemptions applies.

 

What does this mean to employers? 

  1. Ensure your executive, administrative and professional employees are properly classified as exempt under the current salary threshold and duties tests.
  2. If properly classified as exempt under current rules, continue paying those workers just as you did prior to the proposed change to the DOL regulation.

JDSA will continue to monitor this issue in the courts, and update the blog with new developments.


Washington Paid Sick Leave – Begins January 1, 2018

In addition to a minimum wage increase, Initiative 1433 also included provisions for paid sick leave.  Effective January 1, 2018, every employer with one or more employees (as defined in the Washington Minimum Wage Act which excludes certain categories of employees) must provide each employee paid sick leave as stated in the ‘Sick Leave Accrual” information below.

Because the Initiative is silent with respect to full time, part time, or temporary status, these classifications of employees likely also qualify for paid sick leave.

There are many unanswered questions about how this law will be applied and Washington State’s Department of Labor and Industries (“L&I”) will be responsible for answering many of these questions when it issues regulations via the rulemaking process this year.  JDSA will be participating in the rulemaking process and updating our blog as important developments happen.  L&I has held one meeting for interested stakeholders and has distributed stakeholder comments for review. The next meeting of stakeholders is scheduled for February 13, 2017 at L&I’s Headquarters in Tumwater, Washington.

If you are interested in following this process, you can sign up for email updates from L&I’s Wage and Hour list by subscribing to L&I's Wage and Hour E-mail Listserv or by contacting Allison Drake at allison.drake@Lni.wa.gov.

If you would like to submit comments, you can do one of the following:

  1. Send your feedback directly to L&I, or
  2. Submit your questions and concerns by contacting JDSA Law, and we will include them with our comments.
 

Sick Leave Accrual

Under the new law:

  • Employees accrue one hour of paid sick leave for every forty hours worked
  • Employees may use accrued paid sick leave beginning on the 90th calendar day after starting employment
  • Employees may carry over up to 40 hours of sick leave per year

Post-Accident/Injury Drug Testing – OSHA Rulemaking

The U.S. Department of Labor’s Occupational Safety & Health Administration (OSHA) recently issued new rules that will significantly impact employers in two ways: 

  1. As of December 1, 2016, anti-retaliation protections went into effect that restrict employer policies regarding post-accident drug testing and require employers to inform employees of their right to report work-related injuries and illnesses
  2. Starting on January 1, 2017, certain employers (depending on size and industry) must electronically submit certain injury and illness data to the Federal OSHA for posting to OSHA’s website

This applies to your company on January 1, 2017 if:

  • Your company has 250 or more employees at any location during the year, including temporary and seasonal workers.  If you qualify under this, you must report on OSHA Forms 300, 300A, and 301, -OR-
  • Your company has 20-249 employees at any location during the year (including temporary and seasonal workers) and your business is listed as one of these industries. If your company qualifies, you must electronically submit information on OSHA Form 300A only.

In addition, if you have a “Post-Accident Drug Testing” policy, you can no longer condition a post-accident drug or alcohol test solely on the occurrence of an accident at the workplace.  Instead, you must have a reasonable suspicion that drugs and/or alcohol use was a contributing factor to the accident.

For more on the new OSHA rule, visit the OSHA website.

 

OSHA Actions Needed

Beginning 12/1/2016:

  • Inform employees of their right to report work-related injuries and illnesses
  • Ensure the required L&I poster is prominently displayed to satisfy the new OSHA rule. The poster can be found on the L&I website
  • Review your ‘Post-Accident Drug Testing’ policy (if applicable) to ensure it complies with the new rule

Beginning 1/1/2017:

  • Certain employers must submit injury and illness data electronically to OSHA

Cash Payments to Employees in Lieu of Benefits

In June 2016, the federal appellate court for our region ruled in Flores v. City of San Gabriel, that any employer who pays their employees cash payments in lieu of health benefits or pays cash for unused benefits must include those payments in the calculation for the regular rate of pay for overtime compensation.  Failure to do so violates the federal Fair Labor Standards Act (FLSA) and will expose your company to liability for back wages and other penalties.

The court further held that even payments the employer made directly to trustees and third parties for health benefits must be included in the employees’ regular rate of pay. Although such payments are normally excluded from the regular rate when made pursuant to a “bona fide plan” of benefits, in this case, the court determined that the payments did not qualify for the “bona fide plan” exemption because employees received plan contributions in cash that were not incidental in value.

The court then went even further to hold that the employer was liable for back wages and penalties, because the employer did not prove that it acted in good faith and, despite the lack of case law in this area, the employer “knew or showed reckless disregard” that its conduct violated the Fair Labor Standards Act.

Employers should review any cash in lieu of benefit policies in light of this case and consider alternatives to such policies where they contradict the Ninth Circuit’s decision. In the alternative, employers should ensure that cash paid in lieu of benefits is included in the regular rate of pay for purposes of calculating overtime.


Employer-Mandated Tip Pooling – Don’t Do It

In March 2016, the federal appellate court for our region upheld a previous DOL ruling that barred ‘tip pooling’ for employees who typically do not earn tips (i.e., back of the house staff) under the Fair Labor Standards Act. 

Employers in the service industry cannot require staff who do not fall within FLSA’s definition of “customarily and regularly tipped employees” (such as line cooks, dishwashers, etc.) to be included in any tip pooling.  Staff may include these employees in tip pooling voluntarily, however.

Please visit DOL’s website for more information.


Agriculture Law Update

Over the past few years, a higher level of scrutiny has been placed on agricultural employer practices.  Statewide litigation involving issues ranging from rest break pay, meal period compliance, and overtime pay is hitting agricultural employers on a regular basis.  Decades old industry practices are now under evaluation in the courts for both piece rate and hourly employees. 

After a well-known recent case decision, Washington State Department of Labor & Industries published a new policy ‘Paid Agricultural Rest Breaks’. There are additional cases currently in the courts that are challenging current laws and, depending on their outcome, will have a significant impact on agricultural employers.  Employers should keep an eye on the evolving landscape in these areas and follow best employment practices.  

If you have any questions, please contact us and check the JDSA blog for relevant case law updates.


Best Practices Tip: Employee Handbooks and the NLRB

The National Labor Relations Board (NLRB) has come down hard on employers over the 18 months regarding language in employee handbooks that the NLRB views as discouraging employees’ exercise of their rights to organize.   While some employers may not realize it, all employers, regardless of whether their workforce is unionized, are subject to provisions of the National Labor Relations Act that prohibits unfair labor practices, including an employer infringing on employee’s rights to protected concerted activity. 

A few examples of unlawful handbook language include:

  1. “Do not discuss "customer or employee information" outside of work, including "phone numbers [and] addresses." 
  2. "You must not disclose proprietary or confidential information about [the Employer, or] other associates (if the proprietary or confidential 5 information relating to [the Employer's] associates was obtained in violation of law or lawful Company policy)."
  3. "Discuss work matters only with other [Employer] employees who have a specific business reason to know or have access to such information.. .. Do not discuss work matters in public places."
  4.  "[I]f something is not public information, you must not share it."

Source:  GC 15-04, Report of the General Counsel Concerning Employer Rules, March 18, 2015

The key is whether the language could potentially discourage employees from discussing work conditions and pay and/or has the impact of discouraging employees from any concerted activity (i.e., organizing together to change working conditions).  Organizing can be as simple as two or more employees getting together and talking about their work conditions or pay.

Refer to the full ‘Report of the General Counsel’ listed above for an explanation about these requirements.  If you have not reviewed your employee handbook policies in the last several years, we recommend doing so in light of the NLRB’s developing position on these issues.


Permit-Exempt Wells

New Restrictions from The Washington State Supreme Court

There are new rules regarding permit-exempt wells that will restrict growth in some rural communities.

On October 6th, 2016, the Washington State Supreme Court made a ruling that impacts the responsibilities of counties within the State to review permit-exempt (household) wells in connection with building permits and subdivision applications.

A permit-exempt well is, as the name suggests, a well that does not require a water permit from the Department of Ecology.

The Court’s decision will effectively preclude counties from granting building permits and subdivision applications that intend to rely on household wells that will impair a minimum, in-stream flow (a rule set to protect river and stream flows at sufficient levels for fish). Essentially, if withdrawing water from the exempt well would drop a nearby stream level below minimum flow levels set by the Department of Ecology (Ecology), you can’t withdraw water.

So how does this affect you?

At the time of writing, it remains unclear. Primarily, the decision directs the counties to go beyond the in-stream flow rules adopted by Ecology, and conduct their own analysis when determining legal availability of water for rural development.

The result of this decision in many counties will be burdensome hydrogeology report requirements – even for a basic residential building permit on a rural property. It could mean blanket denials of all building permits and subdivision applications for properties within watersheds that are already fully appropriated. This in turn could mean long delays in receiving building and development permits – if any will be granted at all.

In counties with approved watershed plans that include “reserve water” in anticipation of future growth (such as Chelan County), the impacts of this Supreme Court decision will likely be much less extreme. However, regardless of where you live in our State, the landscape is changing rapidly with respect to water availability.  And, while the topic may be dry (pun intended), the decision has important ramifications for future growth within the State.

You’re probably wondering how this came about.

The Hirst decision arose from a lawsuit filed by a group of environmentalists against Whatcom County, alleging that Whatcom County was not satisfying its obligations under the Growth Management Act (GMA) by granting building permits that intended to rely upon household wells without conducting an independent analysis of water availability. Why? Because the GMA requires counties to ensure an adequate water supply exists before granting a building permit or subdivision application.

In its decision, the Supreme Court stated that an applicant for a residential building permit must produce proof that water is both legally available—and actually available—when the applicant is relying on a permit-exempt well.

For environmentalists, the decision is a big win. The decision squarely precludes the unchecked growth of single-family residences relying on permit-exempt wells in rural areas.  As stated by the Court in the decision, “this is precisely the ‘uncoordinated and unplanned growth’ that the legislature found to ‘pose a threat to the environment, sustainable economic development, and the health, safety, and high quality of life enjoyed by residents of this state.’”

Right now, the net result is counties cannot issue building permits unless there is water actually and legally available.

To learn more about this topic and the details of the ruling, read the full article. To better understand how this Supreme Court ruling may affect your permit application, call us today at JDSA Law.

Own A Family Business?

PROPOSED TREASURY REGULATIONS COULD COST FAMILY MEMBERS MORE MONEY

If you operate a family-owned business, transferring interests in that business to other family members for less than fair market value – by way of gift or below-market sale – could be more costly than you realize.

Here’s what can happen. If you, or a family member, transfers interests in your family-owned business, the difference between the actual market value of the interest and what the recipient pays for it is treated as a taxable gift. And any gift in excess of $14,000 ($28,000 if married), to any one recipient will affect the amount your estate can claim tax-free at death.  

Sound complicated? Well, it is. This is a key reason the advice of an attorney, well versed in tax law, is vital when you’re considering the sale of your business to family members. 

Currently, when these family business interests are assessed a market value, discounts are applied if the interest transferred is a minority interest.  These valuation discounts can reduce the value of assets owned by the business by as much as 65%, drastically reducing the value of gifts to relatives. That’s the essentials to the law at this time of writing. 

On August 4, 2016, the Treasury Department and the IRS released proposed regulations under IRC Section 2704 which, if finalized, will severely limit, if not eliminate valuation discounts for interests transferred in a family controlled entity.

The current regulation does little to limit restrictions placed on voting, redemption and liquidation; while the proposed regulations would cripple the ability of family-owned businesses to place restrictions on voting, redemption and liquidation. As a result, it would decrease allowable discounts on transfers of interests in family-owned businesses - and increase gift and estate taxes to the Transferor and their families. 

There are several areas of the regulations that will be changing and could affect your business. These include: 

  • Transfers Within 3 Years of Transferor’s Death that Result in a Lapse of Voting or Liquidation Right
  • Restrictions Imposed or Required by Law
  • Restrictions on Redemption or Liquidation
  • Non-family Member Owners’ Ability to Block the Removal of Covered Restrictions
  • Assignees

So what can you do as the owner of a family business? 

Well, first, take note of the timeline. This could take effect as early as January 1, 2017. If you are planning to transfer interests in your family’s business to other family members, make your transfers before the end of 2016. Our team of attorneys at JDSA will identify the interests affected by these proposed regulations, and help you effectively make your transfers, before the end of the year, ensuring a more favorable gift and estate tax outcome.  

To learn more about this topic, read the full article. To better understand how these proposed changes might affect your business and tax burden, call us today at JDSA Law.

AdminBusiness, Family, Tax, Estate Planning
Cannabis Business Woes: What if you can't pay?

The cannabis industry is walking a fine line between state legality and federal illegality; constantly having to navigate the uncertainty of changing governmental policies, rules and regulations.  Given that recreational cannabis is newly legal in only a handful of states, there is not a lot of history on which business owners can base decisions, which has resulted in unexpected expenses and in some unfortunate cases, failed business ventures.

What happens if you can’t pay the bills?  It turns out that bankruptcy is not an option, but negotiation with the IRS may be possible.

Typically, if a federal tax lien is levied against a business, it can have the debt discharged in bankruptcy. However, the United States Trustees office’s is taking the position that they do not have the ability to lawfully administer Chapter 7 or Chapter 13 bankruptcies if the debtor is part of a cannabis growing or selling operation.  In the case of In re Arenas, the taxpayers owned a marijuana production business in Colorado and filed Chapter 7 bankruptcy.  The Tenth Circuit granted the Trustee’s motion to dismiss the grower’s bankruptcy for cause and disallowed the grower from converting the bankruptcy from a Chapter 7 to a Chapter 13 due to the illegality of the crop.   The Court found that the Trustee could not administer the assets without violating the Controlled Substances Act, a federal law.  Similar cases have been dismissed in California on the same grounds. This ruling would likely apply to all businesses that are directly involved in the growing, processing or selling of cannabis.

If you are in the cannabis industry, you are unable to discharge a federal tax debt through bankruptcy, leaving the options of paying the debt in full or negotiating with the IRS as the only viable paths to discharging the debt.  One such method of negotiation is called an Offer in Compromise (often called an OIC).  In a recent Federal Taxes Weekly Alert, issued May 19, 2016, the IRS has stated that it will not reject marijuana businesses’ offers in compromise on public policy grounds.

If an individual or business has received notice that the IRS has assessed a tax deficiency, the taxpayer may (if it qualifies) issue to the IRS an OIC.  The IRS will only consider an OIC where: (i) the taxpayer can viably dispute all or a portion of the tax debt; (ii) the taxpayer cannot to pay the tax; or (iii) a compromise would promote effective tax administration because collection of the full amount of tax would cause economic hardship for the taxpayer, or compelling public policy or equity considerations provide a sufficient basis for compromising the liability.

The Internal Revenue Manual (IRM) Section 5.8.7.7.2 provides that if there are indicators showing that the taxpayer financially benefits from criminal activity, the case manager may reject an OIC on public policy grounds.  The recently issued IRS Alert clarifies that if the taxpayer otherwise meets the requirements for an OIC, the case manager cannot reject the OIC just because the taxpayer is involved in a cannabis business so long as the business is legal under state law.

This Alert may seem small, but it is a step toward legitimizing cannabis businesses at the federal level and may be a sign for things to come.

Trademark 101: Choose It, Own It, Protect It, Police It

It is a word, slogan, symbol, design, color, sound, or a combination of these things. It tells consumers that particular goods or services originate from a particular source. It is vital to your brand identity as it helps distinguish the goods or services of one party from those of another.

It is your trademark. And you want a strong trademark.

Some strong, and well-known trademarks, are logos (Apple for computers); sounds (MGM’s roaring lion); and color (Home Depot Orange). 

So how do you pick a strong and protectable mark? It might be easy to choose one, but getting your trademarks approved and registered might not be so easy. Not every mark is strong and protectable. Trademarks fall along a spectrum of “distinctiveness” – the more distinctive the mark is to consumers, the stronger and more protectable the mark.

On the flip side of this is the fact that you can’t trademark what it is you sell. A generic trademark is the same exact term as the goods or services that it covers. For example, you cannot trademark the term “beer” to cover the beer you are selling. This is because others in the beer industry need to be able to market their beer using the generic term “beer”.

There are three main categories of trademarks. They are:

  • Descriptive. These are weak and generally are not protectable or registrable. A descriptive mark literally describes an essential element of the goods or services it covers; for example, “cold and creamy” for ice cream.
  • Suggestive. These are strong and eligible for protection and registration. These suggest a quality or characteristics of the goods or services; for example, “Java City” for coffee bar services.
  • Arbitrary or Fanciful. These are the strongest and most protectable type of mark.  These marks either do not exist in language, or have nothing to do with the goods or services they cover; for example,“Google” for the online search engine.

Next, how do you protect it? That’s where trademark rights come into the equation. In purely legal terms, trademark rights are the legal interest in a protectable trademark that may permit the trademark owner to prevent others from unauthorized uses of the trademark. Essentially, if you own it, no one else can use it.

The first step in protecting your trademark right is very simple. The minute you associate a protectable mark with your goods or services and begin marketing or selling those goods or services to the public, you are establishing rights in that mark - even if you have not formally registered your mark.

Formally registering your mark with a state trademark office or the United States Patent and Trademark Office (“USPTO”) may be the best course of action for your business, and certainly gives you the most benefits.

And finally, how would you police your mark? Well, whether trademark rights exist only at common law, or via state or federal registration, a mark is only as strong as the owner’s efforts to police and enforce it.  As owner of a trademark, you really have to monitor the business activity in your region—including online—for uses that may generate a likelihood of consumer confusion with your protectable mark.  If you find a potentially infringing use, you will want to notify the owner of the challenged mark and request that they stop using the challenged mark.  If they do not stop using the mark, you may want to consider a lawsuit for trademark infringement.

Bringing it all together: Trademark law is complex. It is recommended that you consult a trademark attorney when choosing, filing an application to register, and policing and enforcing your trademark. It’s the best way to protect your business interests and your brand.

To learn more about this topic in depth, and to explore the benefits to USPTO registration, read the full article. To better understand Trademark Law, call us today at JDSA Law.