REPORT FROM COUNSEL
FAMILY RESPONSIBILTIES AND THE WORKPLACE
The trend is clear enough that the federal Equal Employment Opportunity Commission (EEOC) recently published an extensive “Enforcement Guidance” on the subject. (Go to www.eeoc.gov.) In it, the EEOC sets out to assist investigators, employees, and employers in determining whether a particular employment decision affecting a caregiver may unlawfully discriminate under federal law.
Recommendations for Employers
The EEOC Guidance includes a collection of 20 examples of prohibited discrimination, each of which falls within 1 of 6 categories: (1) sex based disparate treatment of female caregivers; (2) pregnancy discrimination; (3) discrimination against male caregivers; (4) discrimination against women of color; (5) unlawful caregiver stereotyping; and (6) hostile work environment.
A few of the prohibited scenarios from the examples are illustrative:
An employee, who is the mother of two preschool aged children, is passed over for an executive training program, where some of those chosen were not as qualified, and the only people chosen who had young children were men.
In the Courts
A federal appellate court ordered that the case proceed to a trial and, in so doing, it set an important precedent in some of its pronouncements. For example, “sex plus” or “gender plus” discrimination, involving a policy or practice by which an employer classifies employees on the basis of sex, plus another characteristic, such as motherhood, is actionable in a civil rights case brought by a public employee. In other words, it is possible to support a claim based on discrimination against a sub class of men or women, and not just the class of men or women as a whole.
In addition, the court confirmed that gender based stereotyped remarks can be evidence that gender played a part in an adverse employment decision. This principle applies as much to the supposition that a woman will conform to a gender stereotype (and therefore will not, for example, be dedicated to her job when she has young children) as to the supposition that a woman is unqualified for a position because she does not conform to a gender stereotype.
The school psychologist claimed that her supervisors repeatedly told her that her job was “not for a mother,” and that they were worried that, as the mother of “little ones,” the employee would not continue her commitment to the workplace. Such decision making by stereotype runs counter to the relevant federal statutes.
THE MURKY WATERS OF WETLANDS PROTECTION
The question before the Court was whether wetlands into which fill material was deposited were “navigable waters.” The Court set forth a confusing standard to guide the analysis. On the one hand, it said that the term “navigable waters” includes only relatively permanent, standing, or flowing bodies of water, not intermittent or ephemeral flows of water, and that only those wetlands with a continuous surface connection to such waters are covered by the Clean Water Act. At the same time, it said that wetlands may be protected by the Act if they have a “significant nexus” to navigable waters or could “affect the chemical, physical and biological integrity of other covered waters.” Lower courts have been split as to which standard to apply.
In an effort to clarify, the Environmental Protection Agency and the U.S. Army Corps of Engineers have published a Guidance that identifies those waters over which the two agencies will assert jurisdiction categorically and on a case by case basis. (Go to www.epa.gov.) Essentially, the agencies have not picked one of the competing standards from the Supreme Court over another, but instead will use both of them.
There definitely will be assertion of Clean Water Act authority over wetlands that abut tributaries that come within the “relatively permanent” standard. This refers to tributaries that typically flow year round or that have continuous flow at least seasonally. Wetlands adjacent to waters not fitting in the “relatively permanent” category will be assessed on a case by case basis, using the “significant nexus” test. Perhaps eager to make some kind of pronouncement that is unequivocal, the authors of the Guidance also state that Clean Water Act authority will not be stretched so far as to cover swales, gullies, and ditches that drain only uplands and do not carry a relatively permanent flow of water.
SMALL BUSINESS-MAINTAINING A SAFE WORKPLACE
OSHA has written very detailed standards for maintaining workers’ safety. It also has an expansive mandate to enforce those standards and the various provisions of the Occupational Safety and Health Act. Removing dangerous conditions is only common sense from any point of view, including employer employee relations and a calculation based solely on dollars and cents.
The first step for any small employer is to be informed and educated as to workplace dangers, not all of which may be obvious. OSHA maintains an extensive website (www.osha.gov) that includes information that is especially pertinent to small businesses and guidance about specific threats to safety. Insurance companies provide another good source of information, since these companies have a vested interest in enhancing workplace safety and thereby minimizing insurance claims.
While exotic threats such as anthrax or Legionnaires’ disease capture headlines, the leading causes of serious workplace injuries are more ordinary. They include overexertion, such as excessive lifting, pushing, pulling, holding, carrying, or throwing an object; falls on the same level (as distinct from falls from a height); and “bodily reaction,” which covers injuries from bending, climbing, slipping, or tripping without falling. Regular inspections and repairs, not to mention a vigilant workforce, can head off many such injuries.
Apart from monetary penalties that may follow an OSHA investigation, many billions of dollars each year are paid by employers in medical costs, wage payments, and insurance claims management as a result of workplace injuries. Small businesses get some breaks from OSHA, in the form of smaller monetary penalties and some exemptions from recordkeeping requirements for employers with 10 or fewer employees. Still, given their smaller financial reserves, small businesses, in particular, are well advised to live by the truism that an ounce of prevention is worth a pound of cure.
LLC OWNER LIABLE FOR EMPLOYMENT TAXES
The authority of the government to look to the business owner in his personal capacity for satisfaction of the tax liability went back to the formation of the business. Treasury Regulations allow an individual who is the only owner of an LLC to elect to have the business classified as either an “association” or a “sole proprietorship.” In the former situation, the entity is treated like a corporation. In the latter case, which had been selected by Sean, the business is not considered an entity separate from the owner.
Sean challenged the tax assessment against him, but to no avail. The court rejected his argument that the Regulation imposing liability on him as an individual was invalid because the legislation itself, the Internal Revenue Code, does not expressly authorize imposing personal liability on the sole owner of an LLC. The Regulations, like many others issued by the Treasury Department, are intended as a means to “fill in the gaps” left by the Internal Revenue Code.
Notwithstanding the ultimately onerous effect on Sean of his earlier selection under the Regulations, they are not arbitrary, capricious, or unreasonable. When he checked the box on a form choosing treatment of his company as a sole proprietorship, he effectively agreed to be liable for the company’s debts, but he also had benefited by avoiding the double taxation--once at the corporate level and once as an individual shareholder--that comes with treatment as a corporation.
MISCONCEPTIONS ABOUT FDIC INSURANCE
VACATION HOME TAX TREATMENT
If personal use of the second home is less than the greater of 14 days or 10% of rental days, the home will be considered rental property. Flowing from this classification is the ability to deduct repairs, maintenance, insurance, and depreciation costs. In addition, if the expenses exceed the income from the property, the taxpayer can deduct the loss, subject to passive loss rules. Generally, passive losses up to $25,000 may be deducted if the adjusted gross income (AGI) is under $100,000. The ability to deduct passive losses declines as the AGI increases, eventually phasing out at an AGI of $150,000.
If the owner exceeds the personal use threshold for treatment as rental property, the home is treated as a “residence.” In that case, the owner can deduct expenses only up to the amount of rental income, and no loss deductions are allowed. In addition, before there can be any deduction for operating expenses, the owner must use up the property’s share of mortgage interest and property taxes to offset the rental income, which effectively wastes deductions.
In short, if as an owner of a second home you rent the home for a substantial part of the year, but you also just cannot stay away from the place (that’s why it’s called a vacation home, isn’t it?), enjoy the time away but be prepared for tougher treatment by the IRS.