Fall 2008 Edition

2008 ADA Amendments - What Employers Need to Know

By F. Stephen Glass

On September 25, 2008, President George W. Bush signed a law that significantly amends the Americans with Disabilities Act (ADA), providing broader protections for disabled workers. The bottom line is that more employees will fit within the definition of disabled under the ADA.

Summary of Specific Changes to the ADA:

Prior to the new amendments, disability was defined under the ADA as:

• A physical or mental impairment that substantially limits one or more major life activities
• A record of such an impairment
• Being regarded as having such an impairment

Over the years, the courts narrowed this definition, This included limiting what is considered a "major life activity" and how impairment was defined, For instance, a person with uncontrolled diabetes might be a person with a disability but if it is controlled with medication, exercise, and diet, those mitigating factors would be considered and the person would not be protected by the ADA. Likewise, the court limited what would be considered a major life activity and when it would be considered "substantially" limited,

Now, mitigating measures such as medications, and other interventions that manage a disease or disability must be ignored, As a result, more employees will be covered,

Policies and practices will have to be modified. Employees who would not have been protected will now be covered by the ADA and employers will need to document and engage in interactive discussions to determine what I if any, reasonable accommodations are necessary.

The end result will likely be an increase in ADA claims and lawsuits and, because the definition of disability is very broad, it is less likely that an employer will be able to get out of the case on a motion to dismiss or for summary judgment. Litigation will focus on whether the employer met its obligations to provide a reasonable accommodation and/or whether there was discrimination, and move away from whether the employee is disabled under the law, This means cosily trials when claims are made.

Mitigating Measures Will Be Ignored, The Act provides that the determination of whether an impairment substantially limits a major life activity, such that it rises to the level of a disability, must be made without considering the ameliorative effects of mitigating measures. Examples of mitigating measures include medication, hearing aids or cochlear implants, and prosthetic devices, Ordinary eyeglasses and contact lenses would not be considered.

Recent Employment Law Cases

7thCir: Consensual relationship did not support reprisal claim

Without deciding whether a male janitor who alleged he rejected a supervisor's sexual advances had engaged in protected activity under Title VII, the 7th Circuit Court of Appeals reversed a jury verdict in his favor, holding that his reprisal claim failed as a matter of law because he did not "reasonably believe in good faith" that the actions of his supervisor, with whom he was having a consensual sexual relationship, were unlawful sexual harassment at the time. The janitor testified that he and the supervisor ''were not good with each other" and that he "was not messing with her anymore," statements which reflected personal reasons for ending the relationship, not a belief that he was being sexually harassed. Even statements made by the janitor to his counsel that he felt ''wrongly mistreated" and that he was not being insubordinate when he was discharged did not address the legality of the supervisor's behavior, wrote the circuit court. Currently, there is a circuit split as to whether an individual who rejects a supervisor's sexual advances has engaged in protected activity under Title VII. The 5th Circuit holds no and the 8th Circuit holds yes. The Seventh Circuit has not previously addressed the issue, and it declined to definitively answer the question here (Tate v Executive Mgmt Servs. Inc, October 10, 2008).

10thCir: Driving Is not a major life activity, jury verdict reversed

In a case that would likely be decided differently after the ADA Amendments Act of 2008 (see page 1 article) takes effect, a divided 10th Circuit held that driving is not a major life activity under the ADA, vacating a jury verdict and remanding for a new trial a safety technician's claim that she was discharged because she was regarded as disabled due to epilepsy. After she was diagnosed with complex partial seizures, her employer refused week after week to return her to her job, which it considered "safety sensitive," without a "full release" from her doctor. In a matter of first impression, the 10th Circuit sided with the 2nd and 11th Circuits, holding that while driving is "an extremely important activity to many, even most adults: it is "literally, a means to an end" and secondary to the major life activities enumerated by the EEOC's regulations implementing the ADA. (Kellogg v Energy Safety Servs. Inc, October 15, 2008).

Employees can receive $20 a month for riding bikes to work under bailout law provision

The Emergency Economic Stabilization Act of 2008 (P.L. 110-343), which President Bush signed on October 3, 2008, adds qualified bicycle commuting reimbursements to the types of qualified transportation fringe benefits that an employer may provide to an employee who commutes to work using a bicycle. The provision applies to tax years beginning after December 31 , 2008. The applicable annual limitation in case of any qualified bicycle commuting reimbursement is $20 for every qualified bicycle commuting month for any calendar year.

6th Cir: Employee who disclosed confidential information had no reprisal claim

A female claims adjuster who was fired after delivering confidential documents to attorneys involved in a "disparate pay" law suit against her employer did not engage in protected activity under Title VII 's anti-retaliation provision. The 6th Circuit Court of Appeals announced a six-factor balancing test for determining under what circumstances the delivery of confidential documents in violation of company policy was "reasonable" and, therefore, protected activity under Title VII. (Niswander v Cincinnati Insurance Co., June 24, 2008)

10th Cir: Defense " lawyering" is protected activity under plain language of Title VII

Not smart. When one of two opposing attorneys in a hotly contested city mediation proceeding subsequently was elected mayor, he terminated the assistant city attorney who was the opposing attorney in that mediation. The 10th Circuit had little difficulty upholding the jury's verdict that the firing was unlawful retaliation. (Kelley v City of Albuquerque, September 17, 2008)

Congratulations to Our Clients!!

BARRY'S CAFE THE NATIONAL WINNER!!

Barry Doyle and Barry's Cafe won the National Restaurant Association's "Good Neighbor Award" for 2008. Barry Doyle, owner of the restaurant, was presented this national recognition and a $5,000 check in ceremonies in Washington, D.C. Of course, he immediately contributed the check to the Feed The Firefighters Foundation. Barry's Cafe, located in the Swift Creek Shopping Center, is renowned not only for its food but also for its unselfish efforts to feed fire fighters and emergency personnel when responding to emergencies. His emergency food service is the subject of legends. Barry Doyle is truly one of this world's great guys!

ELECTION TO ADJUST BASIS OF LIMITED LIABILITY COMPANY PROPERTY

By F. Stephen Glass

An election unique to LLCs and partnerships allows a taxpayer acquiring an interest in an LLC taxed as a partnership to "step up" the tax basis of the LLC's assets to reflect the purchase price. This election under Internal Revenue Code ("IRC") Section 754 also allows an LLC to step up the basis of its assets upon certain distributions to members that result in the recognition of gain or loss by the distributee member, or result in the distributee member having a basis in distributed property different from the LLCs. As a result of these basis adjustments, deductions related to LLC assets (for example, depreciation) allocated to the purchasing member (or allocated to all members, if the basis adjustment results from a distribution) are based on the higher stepped up basis of the asset, rather than the LLC's basis. In addition, if the LLC sells the property, the gain or loss recognized by the purchasing member (or all members) is smaller because of the step up.

The election under IRC Sec. 754 requires the LLC to adjust the basis of assets after a qualifying transaction that occurs in the year the election is made or any subsequent tax year. Unfortunately, the Section 754 optional basis adjustment can result in step-downs in basis as well as step-ups. Accordingly, an LLC should carefully consider whether or not to make the election.

 

Business Tax Law - SOCIAL SECURITY WAGE BASE RISES TO $106,800
FOR 2009

By F. Stephen Glass

The Social Security Administration has announced that the wage base for computing the Social Security tax (OASDI) in 2009 rises to $106,800 from $102,000 in 2008, an increase of about 4.7%. The $4,800 increase is due to an increase in average total wages.

The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed worker -· one for Old Age, Survivors and Disability Insurance (OASDI; commonly known as the Social Security tax), and the other for Hospital Insurance (HI; commonly known as the Medicare tax). The FICA tax rate for employees and employers is 7.65% each - 6.2% for OASDI and 1.45% for HI. For self-employed workers, the FICA tax is 15.3%: 12.4% for OASDI and 2.9% for HI. There is a maximum amount of compensation subject to the OASDI tax, but no maximum for HI.

Self-employed workers deduct half of their self-employment tax above-the-line in arriving at adjusted gross income.

Client Personal Planning Special - ADVANTAGES OF REVOCABLE LIVING TRUSTS

By F. Stephen Glass

Revocable Living Trusts ("RLT") have many benefits, including the following:

Avoids Probate. The primary benefit of a RLT is that the property owned by your trust at the time of your dealt will not go through probate, and thereby will not be subject to any expense, delay, or the publicity of probate. Upon your death, the trustee can distribute assets of your RLT to the trust beneficiaries as soon as estate (and other) taxes and debts are paid. Because RLTs are administered without court involvement, your trust records, including the size of your estate and the names of beneficiaries, are not available to the public. By avoiding probate the following advantages are normally achieved: (a) lower estate administration costs, (b) quicker distribution to beneficiaries, (c) greater estate privacy, (d) reduce or eliminate court supervision as to property owned by the trust. (e) avoids the interruption of income from trust property for family members caused by the death or disability of the grantor.

Avoids Guardianship If You Become Disabled. If you become disabled before your death, the court would normally appoint a guardian to manage your affairs. Guardianships are inflexible, burdensome, time-consuming and expensive. A guardianship can be avoided by having a RLT already in place. Upon your disability, your trustee (or if you are the trustee, your successor trustee) immediately takes control of the assets and administers them as directed by the trust document without court involvement. Your successor trustee or trustees will have a fiduciary duty to protect your interests in administering your trust This is a significant benefit regardless of whether the disability is temporary or permanent. Note: Your successor trustee can only manage those assets that you have previously transferred to your trust. Those not previously transferred to the trust may be managed through a durable general power of attorney.

Minimizes Challenges to Your Estate Plan by Disgruntled Beneficiaries: The use of a living trust may reduce the likelihood of a challenge by beneficiaries because of the lack of statutory notice requirements and the fact the the contestant must file an independent court action rather than file a challenge in a probate proceeding.

Advantages over Survivorship Property: Often people try to avoid probate by putting their assets into joint tenancy with their children or other beneficiaries. While this may avoid probate, creating a joint tenancy may cause significant unintended consequences. For example, the added person's creditors may be able to access your property to satisfy their debts. You may even find a child's spouse in a divorce claiming a portion of the property. In addition, gift taxes may be triggered as well as the loss of significant tax benefit such as a stepped up basis upon your death. Further, by adding the person you have given up significant control of that property. If, for example, you added your children to the deed to your beach house. it may be impossible to transfer the property should one of your children withhold consent.

Estate Tax Shelter Trusts. A RLT may facilitate estate tax planning by fully utilizing the unified credit and marital deduction as well as generation skipping tax exemptions.

Flexibility: The trust instrument can be amended until death or incompetency. In addition, routine changes to a RLT (such as a change in beneficiary) can be accomplished with little cost.

Protecting Your Special Needs Child

By P. Devan Culbreth

Estate planning is never an easy task, but families with one or more "Special Needs Children" face additional hurdles in providing for these children while not adversely affecting their eligibility for public benefits. Faced with distasteful options including disinheriting the Special Needs Child or relying on others to care for the child, many parents turn to Special Needs Trusts ("SNTs") to protect their child once they are gone. These trusts are integral in any effort to plan for a Special Needs Child, regardless of a family's financial situation or the availability of funds, and their benefits include:

1. Protecting the Special Needs Child's eligibility for public benefits;
2. Providing a means by which the Special Needs Child's public benefits may be supplemented with various non-essential items and services;
3. Ensuring a pool of funds is available for future use in the event that public funding should cease or be restricted; and
4. Lifetime money management for the benefit of the Special Needs Child.

In addition to benefiting the child in these ways, laws governing SNTs are flexible enough that they can be created as stand alone documents or "living trusts," or as testamentary trusts via provisions in the parent's will. As with other living trusts, "living" SNTs enable the parent's estate to avoid probate and public listing of one's assets and they also provide a means by which other family members may make contributions to the Special Needs Child during their lifetimes without endangering the child's eligibility for public benefits. And, while SNTs are available and recommended to those of varying financial means, the possibility of drafting either revocable or irrevocable SNTs allows those families with greater financial means to plan for and hopefully avoid negative income tax consequences associated with higher degrees of wealth.

As with any estate planning, those families with Special Needs Children should begin planning with respect to their Special Needs Child earlier, rather than later, so that parents are not left worrying about how their Special Needs Child will be cared for when they are gone.

BEWARE OF LIVING TRUST SCAMS!

By F. Stephen Glass

Unscrupulous living trust salespeople target senior citizens and then charge thousands of dollars for what amounts to a set of pre-printed legal forms. In many instances, because all seniors are sold the same trust package, the living trust itself is likely ill-suited or even contrary to these senior citizens' estate planning needs.

Characteristically, these seniors are provided with little or no personal guidance on how to execute the forms, or how to fund their living trust. Rather, after having spent large sums of money and being assured that they would receive free legal assistance, the seniors are then told for the first time to consult with their own attorneys. Ultimately, these seniors have no effective estate plan and have lost thousands of dollars. Unfortunately, the scam may not become apparent until after the victims of the scam have died, when the harm has become irreparable.

About our authors:

F. Stephen Glass is the author of numerous publications on business and business entities as well as estate planning. He is a frequent presenter for the National Business Institute. His practice is concentrated in the areas of business and corporate law, business succession planning and estate planning. He serves on the Cary board of Capital Bank. Mr. Glass has earned the highest peer-review rating for professional excellence and ethical standards by the national publication Martindale Hubbell. He serves on the American Bar Association Business Law Committee on Corporate Governance.

P. Devan Culbreth is an associate with JHVGG. She is a graduate of Wake Forest University, cum laude , and of its law school. She also has a Masters Degree (Psychology) from UNC Wilmington. Her practice concentrates on elder law, estate planning, business and corporate law, and automobile dealer legal transactions.

 

DISCLAIMER: Johnson, Hearn, Vinegar, Gee & Glass, PLLC, provides this newsletter for general information only. The materials contained herein may not reflect the most current legal developments. Such material does not constitute legal advice, and no person should act or refrain from acting on the basis of any information contained In this newsletter without seeking appropriate legal or other professional advice on their particular circumstances. Johnson, Hearn, Vinegar, Gee & Glass, PLLC and all contributing authors expressly disclaim all liability to any person with respect to the contents of this newsletter, and with respect to any act or failure to act made in reliance on any material contained herein. Distribution of this newsletter does not create or constitute an attorney-client relationship between the firm and any reader or user of such information.