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IRS Announces 2013 Retirement Plan Limitations

The IRS has announced the 2013 cost-of-living adjustments for retirement plan related limitations, and almost all of the most watched figures have increased from 2012.  The 401(k) deferral limitation has increased from $17,000 to $17,500 (the additional catch-up contribution limit for those over 50 remains at $5,500), the annual defined contribution plan maximum limit has increased from $50,000 to $51,000, the SIMPLE IRA deferral limitation has increased from $11,500 to $12,000, and the annual compensation limit for contribution calculations has increased from $250,000 to $255,000.

The IRS press release, which includes all of the 2013 retirement plan limitation figures, is available here.

 

Parmenter O’Toole’s John C. Schrier Selected for 2012 Michigan Super Lawyers List

9.15.12 Parmenter O’Toole is proud to announce that John C. Schrier has been selected for inclusion in the 2012 Michigan Super Lawyers list in the practice area of Public Sector Government/Cities/Municipalities. Only five percent of Michigan attorneys are chosen each year.

Super Lawyers selects attorneys based on three distinct phases. The first step includes a statewide nomination process where attorneys nominate their peers based on what they have personally observed. The Super Lawyers researchers then evaluate candidates based on 12 indicators of peer recognition and professional achievement. Lastly, candidates receive a “blue ribbon” panel review by practice area.

“I’m honored that attorneys representing municipalities would nominate me,” said Schrier. “I’m fortunate to have been well-trained by Tom Johnson, Mike Knowlton, and the late Tom O’Toole, all former partners at Parmenter O’Toole. I have also had the pleasure of working with a number of very fine municipal employees, officials and attorneys.”

About John C. Schrier – John C. Schrier’s practice emphasizes public sector law and employment issues for public and private entities. He is the City Attorney for Muskegon (2002-present, after serving as Assistant City Attorney from 1990-2002), North Muskegon (1995-present), Montague (1993-present), Roosevelt Park (2012-present) and acts as the primary legal counsel for the Village of Shelby and other public sector clients of the firm. John also advises employers on a variety of employment issues relating to discipline and discharge, civil rights, wage and compensation, and other employment issues.

Unemployment Insurance in Michigan – Are You an Employee or Independent Contractor?

The issue of classifying an individual worker asan “employee” or an “independent contractor” is an important one in many contexts.  In the context of unemployment insurance, this distinction determines whether an individual is entitled to unemployment insurance and whether an employer is responsible for paying into that fund.

The test used to make that classification varies from one context to another and among various statutes.  In order to determine whether services performed for an employer are those of an independent contractor or employee pursuant to the Michigan Employment Security Act (“the Act”), Michigan uses the “economic reality test.” The court in Tata v. Muscovitz, 354 Mich. 695 (1959) adopted the “economic reality test” as a majority position in Michigan, discarding the traditional master-servant “control test” utilized previously.   The test was further refined in McKissic v. Bodine, 42 Mich.App. 203 (1972), by articulating eight factors to apply to a set of facts to determine the worker’s status. The eight factors are:

  1. The employer will incur liability if the relationship terminates at will;

The work performed is an integral part of the employer’s business;

  1. The employee primarily depends upon the wages for living expenses;
  2. The employee furnishes equipment and material;
  3. The employee holds himself out to the public as able to perform certain tasks;
  4. The work involved is customarily performed by an independent contractor;
  5. The factors of control, payment of wages, maintenance of discipline, and the right to engage or discharge employees; and
  6. Weighing those factors which will most favorably effectuate the purposes of the Act.

To further understand factor #8, the purpose of the Act is stated as follows:

The legislature acting in the exercise of the police power of the state declares that the public policy of the state is as follows: Economic insecurity due to unemployment is a serious menace to the health, morals, and welfare of the people of this state. Involuntary unemployment is a subject of general interest and concern which requires action by the legislature to prevent its spread and to lighten its burden which so often falls with crushing force upon the unemployed worker and his family, to the detriment of the welfare of the people of this state. Social security requires protection against this hazard of our economic life. Employers should be encouraged to provide stable employment. The systematic accumulation of funds during periods of employment to provide benefits for periods of unemployment by the setting aside of unemployment reserves to be used for the benefit of persons unemployed through no fault of their own, thus maintaining purchasing power and limiting the serious consequences of relief assistance, is for the public good, and the general welfare of the people of this state.

An Administrative Law Judge making a determination (or redetermination) will weigh the evidence as it applies to each of the eight factors and decide whether each factor predominates in favor of a finding that a worker is an employee or an independent contractor.

By Michelle Landis

 

 

Unemployment Insurance in Michigan

Are You an Employee or Independent Contractor?

The issue of classifying an individual worker as an “employee” or an “independent contractor” is an important one in many contexts.  In the context of unemployment insurance, this distinction determines whether an individual is entitled to unemployment insurance and whether an employer is responsible for paying into that fund.

The test used to make that classification varies from one context to another and among various statutes.  In order to determine whether services performed for an employer are those of an independent contractor or employee pursuant to the Michigan Employment Security Act (“the Act”), Michigan uses the “economic reality test.” The court in Tata v. Muscovitz, 354 Mich. 695 (1959) adopted the “economic reality test” as a majority position in Michigan, discarding the traditional master-servant “control test” utilized previously.   The test was further refined in McKissic v. Bodine, 42 Mich.App. 203 (1972), by articulating eight factors to apply to a set of facts to determine the worker’s status. The eight factors are:

  1. The employer will incur liability if the relationship terminates at will;
  2. The work performed is an integral part of the employer’s business;
  3. The employee primarily depends upon the wages for living expenses;
  4. The employee furnishes equipment and material;
  5. The employee holds himself out to the public as able to perform certain tasks;
  6. The work involved is customarily performed by an independent contractor;
  7. The factors of control, payment of wages, maintenance of discipline, and the right to engage or discharge employees; and
  8. Weighing those factors which will most favorably effectuate the purposes of the Act.

To further understand factor #8, the purpose of the Act is stated as follows:

The legislature acting in the exercise of the police power of the state declares that the public policy of the state is as follows: Economic insecurity due to unemployment is a serious menace to the health, morals, and welfare of the people of this state. Involuntary unemployment is a subject of general interest and concern which requires action by the legislature to prevent its spread and to lighten its burden which so often falls with crushing force upon the unemployed worker and his family, to the detriment of the welfare of the people of this state. Social security requires protection against this hazard of our economic life. Employers should be encouraged to provide stable employment. The systematic accumulation of funds during periods of employment to provide benefits for periods of unemployment by the setting aside of unemployment reserves to be used for the benefit of persons unemployed through no fault of their own, thus maintaining purchasing power and limiting the serious consequences of relief assistance, is for the public good, and the general welfare of the people of this state.

An Administrative Law Judge making a determination (or redetermination) will weigh the evidence as it applies to each of the eight factors and decide whether each factor predominates in favor of a finding that a worker is an employee or an independent contractor.

By Michelle Landis

 

Protect Your E-Commerce Business from Copyright Trolls

Your website most likely has pictures and possibly video on it as part of the design or to help in the sale of products.  The use of these items is necessary to show your customers what the product looks like or the product’s functions.  However, all too often the source of the pictures or video is not properly documented.  This opens the door for “Copyright Trolls”.  Copyright Troll is a term that is used to describe a company or individual that buys up the copyrights to works and then engages in a campaign to try to profit from possible infringement through intimidating demand letters.

This term does not refer to someone who is making legitimate claims for use of a photo that may have been copied from a website illegally. The two typical types of Copyright Trolls are (1) those who try to scam people by intentionally putting their works out on the Internet as “free” and then later demand money for their use, and (2) those who purchase another company’s rights (usually a company that owns a large amount of copyrights in photos) and sends out blanket demand letters to all those using the photos to see if they can prove that they paid to use the photos or videos. Some schemes may be legal and some are done through misrepresentation.

What do the Trolls hope to get?

Money, of course.   A typical demand letter will ask for $1,500 to $2,500 because it will probably cost more than that to hire a lawyer to fight their claims.  Owners of registered copyrights have very strong rights to recover damages and the Copyright Troll is betting that you did not carefully document where the photos or video came from and what your terms of use are for those items.  A registered copyright owner’s damages are not limited to just the actual damages that they can prove.  The statute allows them to collect damages in the amount of $7,500 to $30,000 per work as the Court may determine, even if you did not intend to infringe the owner’s rights.  If the use is determined to be intentional, then the award of damages can be increased up to $50,000 per work.  Also, the copyright owner is entitled to recover its attorney fees for suing you, which can add a significant amount to the damage award.  These Trolls use this statutory language to intimidate people into paying the lesser amount they demand.

How do you protect your website from copyright claims?

Document all photographs and video used on the website, including all photos used in flash.  All photos and video used in the design of your website need to be documented, even if only portions of a photo or video are used or if they have been altered during the development process.  You should list all information that you know about that photo or video, including where the photos came from, the photographer, the date you first used the photo or video, the terms of your use of the photo or video (your license agreement) and the date the license expires.  You should print out and file all your license agreements in one location and make note of the photo or video to which each license agreement applies.

If you hire someone to take photos or video for you, you need to document the transfer of the rights to you and the terms of your use of such items.  Under copyright law, the photographer owns the copyright interests unless those rights are transferred in writing.  Therefore, if an independent contractor creates something for you, you must either obtain a license agreement to use it or obtain an assignment of the ownership rights in the photo or video.  Again, each item should be carefully documented and filed so that if you receive a demand letter you are prepared to defend their claims.

 

Enforcing Parent-Signed Waivers of Liability for Injuries to Children During Recreational Activities

On June 21, 2011, Governor Rick Snyder signed into law House Bill 4231, partially overturning a longstanding public policy and giving parents the ability to release a party from liability if his or her child is injured during a recreational activity.  The new law allows a parent, before their child participates in a recreational activity, to sign a waiver releasing an organizer or coach from liability for economic or noneconomic damages for a personal injury to the child.  However, this law only applies to athletic or recreational sports sponsored or organized by a nongovernmental and nonprofit organization.

House Bill 4231 is a response by the Legislature to the Michigan Supreme Court’s 2010 opinion in Woodman v. Kera LLC, 486 Mich 228; 785 NW2d 1 (2010).  The Court held in Woodman that preinjury liability waivers signed by a parent on behalf of his or her child are unenforceable because a parent has no authority to bind his or her child to a contract.  Nevertheless, the Court recognized that the public policy may need to change and invited the Legislature to enact a new law if it wanted to make parental waivers enforceable.  The Legislature reacted to the opinion by enacting House Bill 4231, partially overturning a doctrine that found its roots in case law more than 130 years ago.

Parental waivers of liability remain unenforceable if the activity is sponsored by a governmental or for-profit organization.  However, cities, townships, municipalities, or organizations that operate for a profit still may be able to protect themselves by using a waiver that includes an indemnification clause stating that the parent agrees to indemnify the organization or coach from any claim brought by on or behalf of his or her child in connection with the recreational activity.  The Woodman Court held that such a clause in which a parent contracts to indemnify the defendant could be a suitable alternative for reducing liability.  486 Mich 228, 257 n. 74.  Therefore, even if House Bill 4231 does not apply to an organization, an indemnity clause may provide adequate liability protection.

* George Johnson is an attorney with Parmenter O’Toole, PLC in Muskegon, Michigan. Parmenter O’Toole is a full-service law firm with extensive experience in the area of business and real estate law. The comments in this article are not intended to be a substitute for legal guidance or advice for a specific situation.  You should obtain informed legal counsel to assist in your decisions relating to any issues which may be raised in this article.  For additional information regarding the above topic, or any other legal issues you may have, Mr. McEvoy can be reached at gwj@parmenterlaw.com or 231.722.5508.

Employers beware: even “non-employees” can sue for discrimination

In Hall v. Stark Reagan, P.C. et al. 2011 Mich. App. LEXIS 1560, decided September 13, 2011, the Michigan Court of Appeals has clarified that employers in Michigan may be liable for claims of discrimination under the Elliott Larsen Civil Rights Act (ELCRA) even against non-employees, so long as a plaintiff establishes that the employer affected or controlled a term, condition or privilege of the non-employee’s employment.

The ELCRA sets forth the following:

An employer shall not do any of the following:

Fail or refuse to hire or recruit, discharge or otherwise discriminate against an individual with respect to employment, compensation or a term, condition or privilege of employment, because of religion, race, color, national origin, age, sex, height, weight, or marital status. [MCL 37.2202(1)(a)].

The plaintiffs in the case, Hall and Ortner, were attorneys and shareholders at the law firm of Stark Reagan.  When the law firm decided to terminate their shareholder status, plaintiffs brought a claim for age discrimination under the ELCRA.  The law firm argued that the attorney plaintiffs could not bring a claim under the ELCRA because they were not “employees” of the firm; they were shareholders. The Hall court concluded that, even assuming Hall and Ortner cannot be characterized as Stark Reagan “employees,” the ELCRA permits the plaintiffs to pursue an age discrimination case because Stark Reagan qualifies as an “employer” under the statute and the firm’s actions “affected or controlled a term, condition, or privilege” of Hall’s and Ortner’s employment.

The Hall court relied on a 2005 Michigan Supreme Court case, McClements v. Ford Motor Co., 473 Mich. 373, 702 NW2d 166, which held that a worker is entitled to bring an action against an employer, even if he is not an employee, if the worker can establish that the defendant affected or controlled a term, condition or privilege of the worker’s employment.  The ELCRA does not state that the discrimination must be against an “employee,” but rather against any “individual” whose employment is adversely affected by an employer. The ELCRA defines an “employer” as “a person who has 1 or more employees, and includes an agent of that person.”  MCL 37.2201(a).  A “person” includes “an individual, agent, association, corporation, . . . partnership, . . . or any other legal or commercial entity.” MCL 37.2103(g).

Professional partnerships, such as law partners or physicians’ groups are considered “employers” under the ELCRA as long as they have at least one true employee.  The Hall decision clearly holds that these groups may be held liable for discrimination against their business partners or shareholders, who are not “employees,” if the firm or group can be said to have affected or controlled a term, condition or privilege of the individual claiming discrimination.  Decisions to eliminate partners or shareholders must be considered in light of the Hall court’s clear message that such actions are subject to the anti-discrimination provisions of the ELCRA inMichigan.

In the federal realm, Title VII and the Americans with Disabilities Act (“ADA”) use the term “employee,” rather than “individual,” as in the ELCRA.  Clackamas Gastroenterology Associates v. Wells, a 2003 United States Supreme Court case held that an ownership interest does not necessarily preclude a claim of discrimination under the ADA.  To determine whether the shareholder-directors in that case were employees, the common-law element of “degree of control” was the principal guidepost.  For federal claims of discrimination by shareholders, the question is whether the shareholder-director operates independently and manages the business or instead is subject to the firm’s control, and thus qualifies as an employee. Pursuant to the McClements-Hall decisions,Michigan’s ELCRA’s use of the term “individual,” instead of “employee” changes the analysis from one of “control” to a simple look at whether the individual’s job was adversely affected by an entity fitting the definition of “employer.”

For more information on this topic or other employment law questions, contact John C. Schrier 231.722.5401.

Municipal Indemnification: The Evolving Case Law

The Municipal Legal Briefs, a publication of the Michigan Municipal League, recently published an article written by Parmenter O’Toole attorney John Schrier, with assistance of summer clerk Colleen Healy, concerning a municipality’s ability to indemnify another party.  The article, “Municipal Indemnification:  The Evolving Case Law,” outlines how the courts have expanded a municipality’s legal ability to indemnify a third party in certain circumstances.  Here is a copy of the article if you are interested in reading it.

Municipal Indemnification

Parmenter O’Toole’s Public Sector practice group is prepared to assist municipalities on a variety of issues, including public finance issues.  For assistance call John Schrier at (231) 722-5401.

How can we preserve some of our life savings and still pay for the nursing home?

The No. 1 question we hear from people who need to obtain Medicaid assistance in order for their spouse to stay in a nursing home is: How can we preserve some of our life savings and still pay for the nursing home?  Most people do not know that Michigan Law allows a married couple to keep 100% of their assets and still qualify for Medicaid assistance.

The Elder Law team at Parmenter O’Toole is committed to educating our community about the programs and services available to nursing home patients through Medicaid.  To learn more about Medicaid Planning visit our website at https://www.parmenterlaw.com/services/elder-law/medicaid-planning/.

Michigan Court of Appeals affirmed Parmenter O’Toole’s trial court victory

Michigan Court of Appeals affirmed Parmenter O’Toole’s trial court victory.  Parmenter O’Toole was retained to defend several clients who were involved in state court litigation regarding stock redemption agreements.  The stockholders who were redeemed later claimed fraud and forgeries.  The trial court judge dismissed the plaintiffs’ claims and plaintiffs filed an appeal to the Michigan Court of Appeals.  In a 2-1 opinion, the appellate court ruled in favor of Parmenter O’Toole’s clients.