Tag: Illinois

New Rules Provide Insights for Pregnancy Accommodations in Illinois

Since the start of the year, all employers in Illinois with one or more employees are required to provide accommodations for pregnant workers for conditions associated with pregnancy and childbirth.  Now the Illinois Department of Human Rights (IDHR) and the Illinois Human Rights Commission (IHRC) have issued a set of proposed joint rules to assist with interpretation and enforcement of the new law.

Under amendments to the Illinois Human Rights Act that went into effect on Jan. 1, 2015, employers and labor organizations must make reasonable accommodations for any medical or common condition related to pregnancy or childbirth, unless the employer or labor organization can demonstrate that the accommodation would impose an undue hardship on the ordinary operations of the business of the employer or labor organization.

Beyond the information already provided in the law itself, the rules go into further detail as to the types of accommodations that employers must consider and how an employer should engage in the interactive process when considering a request for an accommodation. The rules also provide detailed sections on consideration of job transfers and time off as reasonable accommodations.

Of particular interest is the guidance concerning when an employer can seek medical certification of an employee’s need for a reasonable accommodation. While the rules make clear that employers are entitled to obtain information in order to evaluate if a requested reasonable accommodation may be necessary, the request needs to be limited to:

  • The medical justification for the requested accommodation;

  • A description of the reasonable accommodation medically advisable;

  • The date the reasonable accommodation became medically advisable; and

  • The probable duration of the reasonable accommodation.

Moreover, employers may request documentation from the job applicant’s or employee’s health care provider concerning the need for the requested accommodation if:

  • The employer would request the same or similar documentation from a job applicant or employee regarding the need for reasonable accommodation for conditions related to disability;

  • The employer’s request for documentation is job-related and consistent with business necessity; and

  • The information sought is not known or readily apparent to the employer.

Under the rules as proposed by the IDHR and IHRC, the determination of whether an employer’s request for documentation from the employee’s healthcare provider concerning the need for a reasonable accommodation is job-related or consistent with business necessity will depend upon the totality of the circumstances, including  factors such as whether the need for reasonable accommodation is readily apparent;  whether the job applicant or employee is able to explain the relationship between the requested accommodation and her pregnancy condition;  the employer’s reasons for requesting the information; and  the degree to which the requested accommodation would impact the ordinary operations of the employer’s business if it were granted by the employer.

If an employee needs a reasonable accommodation beyond the probable duration identified by her healthcare provider, the employer may request additional information from the health care provider.

It is also important to note that, under the rules, medical conditions related to pregnancy or childbirth need not constitute a disability within the meaning of the Illinois Human Rights Act and may be transitory in nature.

The rules, which were published in the Illinois Register, are expected to go into effect sometime in October.  Once fully adopted, the rules will be found at 56 Ill. Admin. Code 2535.10 et seq. For now, they can be found in the Illinois Register. And if you are an employer in Illinois and you have not yet posted the notice required under the new law, you can print a copy from the Illinois Department of Human Rights website.

Article By Jennifer Cerven of Barnes & Thornburg LLP

© 2015 BARNES & THORNBURG LLP

Illinois Department of Revenue Issues Proposed Amendments to Shipping and Handling Regulations

The Illinois Department of Revenue (Department) recently proposed amendments to its regulations governing the taxability of shipping and handling charges. The Proposed Amendments to 86 Ill. Admin Code §§ 130.415 and 130.410 (Proposed Amendments) are intended “to incorporate the holding of the Illinois Supreme Court in Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d 351 (2009) … [and to] clarif[y] when transportation and delivery charges are considered part of ‘gross receipts’ subject to the Retailers’ Occupation Tax Act or the Use Tax Act.”  The Proposed Amendments state that they are retroactive to November 19, 2009, the date of the Kean decision.

Delivery charges taxable when they are “inseparably linked” to the taxable sale of property

In Kean, the Court held that delivery charges for products purchased over the internet and shipped to Illinois customers are taxable when “an ‘inseparable link’ exists between the sale and delivery of the merchandise plaintiffs purchased.”… 235 Ill. 2d at 376.  Citing Kean, the Proposed Amendments adopt that rule (Prop. 86 Ill. Admin. Code § 130.415(b)(1)(B)(i)) and provide two examples of an “inseparable link”:

  • When delivery charges are not separately identified to the customer in the contract or invoice; or

  • When delivery charges are separately identified to the customer, “but the seller does not offer the purchaser the option to receive the tangible personal property in any manner except by delivery from the seller (g., the seller does not offer the purchaser the option to pick up the tangible personal property).”

Prop. § 130.415(b)(1)(B)(ii)

The Proposed Amendments provide that if a product can be sold without rendering the delivery service, the service is not taxable.  Prop. §130.415(b)(1)(B)(ii).  Although this language is not limited to a circumstance in which a pickup option is offered, all of the examples provided by the Department focus on that fact pattern.  Notably, the pickup option need not be at an in-state location.  This is consistent with the Department’s recent private letter rulings concluding that when a pick up option is offered, even if it is out-of-state, the delivery charges are not taxable.  ST-15-0011-PLR (7/16/15); ST-15-0012-PLR (7/27/15).

In a change from the Department’s prior practice, the Proposed Amendments provide that separately stated shipping charges not found to be inseparably linked to the sale of goods are not taxable even if they include a profit component (i.e., exceed the actual cost of shipping).  Cf. the current regulation, at 86 Ill. Admin. Code §130.415(d), with Prop. §§ 130.415(b)(1)(C) and (b)(1)(D)(iv).

Practice Note:

Sub-part (b)(1)(B)(ii) of the Proposed Amendments supports the conclusion that offering customers free standard shipping evidences that any other shipping service for which a seller charges customers (i.e., expedited shipping) are separately contracted for and thus nontaxable.  Arco Industrial Gas Division, The BOC Group, Inc. v. Department of Revenue, 223 Ill. App. 3d 386, 392 (4th Dist. 1991), which is cited in the Proposed Amendments, also supports this conclusion.  Several defendants have successfully raised this defense in response to Illinois False Claims Act litigation alleging a failure to collect tax on shipping charges.

Taxability and rate depend on the underlying property

The Proposed Amendments go on to provide that in the event delivery charges are “inseparably linked” to the sale of property, their taxability and rate depends on the taxability of the property sold:

Property Sold & Delivered

Delivery Charges

All exempt

Not taxable

Part exempt; part taxable

Not taxable if selling price of nontaxable property > selling price of taxable property

All property subject to high or low tax rate

Follows tax rate of property

Some property subject to high tax rate and some subject to low rate

Low rate if selling price of low rate property  > selling  price of high rate property

Exempt, high and low rate property

Not taxable if selling price of exempt property  > selling price of taxable property; low rate if selling price of low rate property  > selling price of high rate property

Prop. § 130.415(b)(1)(E).

Incoming transportation generally remains a taxable cost of doing business

The Proposed Amendments maintain the longstanding rule that a seller’s incoming transportation or delivery costs or costs to move property to ready for customer delivery are taxable costs of doing business.  The rule applies even if the seller passes on these costs to a buyer by separately stating them on an invoice.  86 Ill. Admin. Code § 130.415(e); Prop. § 130.415(b)(2).

Taxability of handling charges follows shipping charges

The Department also proposes similar amendments to the regulation relating to the taxation of handling charges.  Prop. § 130.410(c).

Practice Note:

To the extent the Proposed Amendments were issued by the Department to assist companies who have been named in lawsuits filed under the Illinois False Claims Act alleging an intentional failure to collect and remit tax on shipping and handling charges, it may be too late.  The Proposed Amendments come almost six years after Kean, and after hundreds of companies have been forced to defend against these claims, regardless of their audit history with the Department, and regardless of their shipping policies.  It remains to be seen whether the Department’s effort to impose the Proposed Amendments retroactively will be adopted, or whether the retroactivity will be helpful to companies who are forced to defend against this litigation.  The Proposed Amendments also are inconsistent with position that many of the Department’s auditors have taken, both before and after Kean, that taxpayers need to collect tax on separately stated shipping and handling charges only to the extent that the charges are a source of profit for the company.

Article By Mary Kay McCalla Martire, Catherine A. Battin & Lauren A. Ferrante of McDermott Will & Emery

© 2015 McDermott Will & Emery

Wine Seller Victory in Illinois Qui Tam Lawsuit

Wine sellers received a second positive update just this week in the qui tam winery lawsuits in the Circuit Court of Cook County, Illinois. On September 3, 2015, Judge Margaret Ann Brennan granted Motions to Dismiss filed by Co-Defendants, 1-800-Flowers.com, Inc. and TSG, LLC in a two-count False Claims Act complaint. In Count I, the Relator alleged that the out-of-state wine-seller defendants failed to pay local sales tax, owed through obligations under the Illinois Liquor Control Act; and Count II was the all too familiar allegation that defendants failed to collect and remit tax on shipping and handling charges for the wine they sold and shipped into Illinois.

Whisle with closed zipper - 3D concept

After months of briefing and a lengthy oral argument, Judge Brennan granted our Motions to Dismiss both Counts I and II of Relator’s Second Amended Complaint. Regarding Count I, Judge Brennan said that the Wine Shippers License, required to be held by wine sellers in Illinois pursuant to the Illinois Liquor Control Act (“LCA”), does not obligate local tax collection or remittance as argued by Relator. Specifically, Relator alleged that because the out-of-state wine sellers failed to comply with the LCA by improperly selling some wine that they did not produce, that they must be considered Illinois retailers and thus must collect and remit local tax. The parties agreed that Defendants did collect and remit the 6.25% use tax required on sales made into Illinois, but Judge Brennan noted that it would take an absurd leap in interpreting the LCA to conclude that it obligated Defendants to collect local sales tax as well. Important points were also made that local tax is based on the location where the seller is in the “business of selling” and that all of the “selling activities” occurred outside Illinois. Also, the LCA contains its own remedies for failing to comply with the Wine Shippers License, none of which relate to tax collection.

Regarding Count II, Judge Brennan was convinced that the Defendants’ disclosure of shipping and handling charges deducted from their gross receipts on their monthly Illinois returns (ST-1s) was sufficient to take this claim out of a knowingly made, False Claims Act issue. The Defendants met their obligation of monthly filing and there was no proof that the Department felt Defendants should have been collecting and remitting tax on the shipping and handling charges. Even if it was ultimately deemed inaccurate in an audit by the Department, it was still a truthful disclosure to the Department, not a knowing, false statement.

What Does “with Prejudice” Mean?

Significantly, Judge Brennan dismissed the claims with prejudice, meaning the Relator cannot re-plead claims, in this case, for a fourth time. The only options for the Relator at this point would be a Motion to Reconsider (unlikely because the Judge was emphatic and thorough in her decision) or to appeal the decision to the Illinois Appellate Court. Because these same issues are in hundreds of other cases before Judge Mulroy, it is unlikely that Relator will appeal this one-off decision by Judge Brennan. If Relator appeals and the dismissal is upheld, that would create legal precedent that would hurt Relator in all of his other cases pending and yet to come before Judge Mulroy.

So while it is great news that Judge Brennan decided correctly on these issues, where Judge Mulroy has consistently held that questions of fact remain and the defendants are thus forced to pay large settlement amounts or litigate through trial, the sobering news is that her ruling is not legal precedent for Judge Mulroy, another Circuit Court Judge; and it is Judge Mulroy who oversees the vast majority of the winery qui tam lawsuits.

Moving Your Case to a New Judge

You are most certainly asking at this point: How do we move our case to Judge Brennan? Because of the protections put in place against forum and judge shopping, it is extremely difficult and depending on how far you are into the case, potentially impossible. The first step would seem to be a simple one, however, by taking advantage of the Illinois law allowing for a substitution of judge as long as no substantive rulings have been made by the judge yet.

Article By David S. Ruski of Horwood Marcus & Berk

© Horwood Marcus & Berk Chartered 2015. All Rights Reserved.

Another Court Rejects Notion that Restrictive Covenant Agreements Must be Supported by At Least Two Years of At-Will Employment

Godfrey & Kahn S.C. Law firm

In a recent decision addressing the enforceability of a restrictive covenant agreement under Illinois law, the court in Bankers Life and Casualty Co. v. Miller, 2015 U.S. Dist. LEXIS 14337 (N.D. Ill. 2/6/15), ruled that Illinois law did not require a minimum of two years of employment to support the employee’s restrictive covenant obligations.  The court rejected the employee’s argument that the “bright-line” rule created by the Illinois Appellate Court in Fifield v. Premier Dealer Services, Inc.required at least two years of continued employment to justify enforcement of the non-competition restrictions.

The Bankers court ruled that “the competition restrictions were not invalid for lack of consideration as a matter of law on the basis that the departing employees’ tenure was less than two years[.]”  Instead, the court ruled that each non-competition restriction should be assessed on a case-by-case basis.  The Bankers ruling is in line with a prior Northern District of Illinois decision, Montel Aetnastak, Inc. v. Miessen, in which the court (by a different judge) ruled that 15 months of continued employment was sufficient consideration to support a non-competition restriction.  In Montel, the employee voluntarily resigned his employment.

In Illinois state courts, however, employers have not had such good luck.  The Illinois Appellate Court in Prairie Rheumatology Associates, S.C. v. Francis recently reiterated the two-year rule created in Fifield.

For employers, the difference in the treatment of Illinois restrictive covenant agreements emphasizes the importance of beating the employee to the courthouse.  In other words, if an employee files a declaratory action in state court, the odds are that the court will follow the Fifield rule.  If, on the other hand, the employer files first in federal court, the odds favor the employer.

Yet another case, Instant Technology, LLC v. Defazio, 2014 U.S. Dist. LEXIS 61232 (N.D. Ill. May 2, 2014), is pending in the Seventh Circuit Court of Appeals.  We will monitor this case and follow up once a ruling is issued.

ARTICLE BY

Rufino Gaytán
Deborah Rehorst
OF
Godfrey & Kahn S.C.

Employers in Illinois Take Note: Pregnancy Accommodation Amendments Go Into Effect January 1, 2015

Neal Gerber

As of January 1, 2015, the recently enacted pregnancy accommodation amendments to the Illinois Human Rights Act (“IHRA”) will go into effect, requiring many Illinois employers to update or change their policies and practices with regard to the expecting and new mothers in their workforce.  Read below for the highlights of the IHRA’s pregnancy-related amendments, and stay tuned for an announcement from our group about an upcoming breakfast training at which we will discuss the details of the amendments, along with other employment hot topics for 2015.

Which employers are covered by the amendments?  All private, non-religious employers in Illinois, regardless of the number of employees, will be covered by the new pregnancy-related provisions of the IHRA.  Note, most IHRA provisions generally apply only to employers with 15 or more employees in Illinois.  The Act’s pregnancy-related amendments, however, apply to all employers, regardless of size.

Which employees are protected by the amendments?  The amended IHRA prohibits discrimination based on, and requires employers to provide reasonable accommodations for, “pregnancy.”  “Pregnancy” is defined broadly under the Act to include “pregnancy, childbirth, or medical or common conditions related to pregnancy or childbirth.”  Thus, the amendments generally will apply to applicants and employees who are expecting and who recently gave birth.

What do the amendments require?  Broadly speaking, the amendments impose an affirmative obligation on employers to offer reasonable accommodations for pregnancy and childbirth-related conditions.  Such accommodations may include:  more frequent or longer breaks; providing time and a private, non-bathroom space to express breast milk; physical accommodations such as seating and assistance with manual labor; modified or a part-time work schedule or even “job restructuring”; time off to recover from conditions related to childbirth; and/or leave “necessitated by” pregnancy, childbirth or medical “or common conditions” resulting from pregnancy or childbirth.

Importantly, under the amended IHRA employers may not require expecting or new mothers to just take leave, or to accept an accommodation that the applicant or the employee did not request.  The individual must agree to the form of accommodation being offered.  However, prior to providing the requested accommodation, employers will have the ability to require the requesting employee to submit medical proof of the need for that accommodation, to include a description of the advisable accommodation and its probable duration.

In addition, similar to the provisions of the federal Americans with Disabilities Act, the amended IHRA will not require employers to create new positions, discharge or transfer other employees, or to promote an unqualified employee in order to meet the “reasonable accommodation” requirement.  If the requested accommodation would pose an “undue hardship,” it need not be provided.  Employers should note, however, that the amended IHRA (similar to the ADA) places the burden of proving an “undue hardship” squarely on the employer, and meeting that burden is no easy task.  An “undue hardship” will be found to exist only if the requested accommodation is “prohibitively expensive or disruptive” when considered in light of certain specified factors, including the accommodation’s nature and cost, the overall financial resources of and impact on the facility or facilities involved in providing the requested accommodation, the overall financial resources of the employer, and the employer’s general operations.  Importantly, if the employer provides or would be required to provide the kind of accommodation being requested to other similarly-situated, non-pregnant employees, the amended IHRA will impose a “rebuttable presumption” that the requested accommodation would not impose an undue hardship.

Once an employee’s need for reasonable accommodation ceases and she relays an intent to return to her former position, the amended IHRA requires that the employer reinstate her to that former position or an equivalent position with equivalent pay, without loss of seniority or other benefits, unless, again, doing so would impose an undue burden.

The amended IHRA further requires that employers in Illinois post an Illinois Department of Human Rights-prepared or approved notice about the pregnancy accommodation amendments in the workplace, and also include appropriate information regarding employees’ rights under the amendments in their handbooks.

In short…  Considering that women compose nearly 50% of all workers in Illinois, it is important for employers to understand and ensure compliance with the IHRA’s new pregnancy-related amendments.  Any request for an accommodation made by an expecting or new mother must be evaluated thoughtfully, with the new statutory framework in mind.

ARTICLE BY

Sonya Rosenberg
OF
Neal, Gerber & Eisenberg LLP

2014 Year-End Illinois Estate Planning: It’s Time for a Careful Review

Much Shelist law firm logo

As 2014 comes to a close, now is the perfect time for careful planning to address the income, estate, gift and generation-skipping taxes that can directly affect you.  In addition to making sure your estate plan is up to date, making a few important decisions now can reduce your tax liability later.

Transfer Tax Exemption and GST Exemption

The exemption amount that individuals may transfer by gift and/or at death without being subject to federal transfer taxes increased in 2014 to $5,340,000; it will further increase to $5,430,000 in 2015.  The maximum federal estate tax rate remains 40%.  In contrast, Illinois imposes a state estate tax once a decedent’s estate exceeds $4,000,000 (which is not adjusted for inflation). The rates of Illinois estate tax range from 8% to 16% (with the Illinois estate tax paid allowable as a deduction for federal estate tax purposes). Both the federal and Illinois estate tax laws allow for a marital deduction for assets passing outright to a spouse or to qualifying trusts for the benefit of a surviving spouse.  Illinois allows this deduction to be claimed even if a marital deduction is not elected for federal purposes.

In order to impose a death tax at each successive generational level, a generation-skipping transfer (“GST”) tax – equal to the highest estate tax rate – is assessed on transfers to grandchildren or more remote descendants.  However, every taxpayer is also given a separate federal GST exemption equal to the federal transfer tax exemption (i.e., $5,340,000 in 2014 and $5,430,000 in 2015).

Estate planning documents should be reviewed to make certain that beneficial use of the federal and state transfer tax exemptions, federal and/or state marital deductions and federal GST exemption are being utilized.

Annual Exclusion Gifts

Making use of annual exclusion gifts remains one of the most powerful – and simplest – estate planning techniques. For 2014 (and 2015), individuals can make an unlimited number of gifts of up to $14,000 per recipient, per calendar year.  Over a period of time, these gifts can result in substantial transfer tax savings, by removing both the gift itself and any income and growth from the donor’s estate, without paying any gift tax or using any transfer tax exemption.  An individual cannot carry-over unused annual exclusions from one year to the next.  If such exclusions are not utilized by the end of the year, the balance of any annual exclusion gifts that could have been made for that year are lost.  These transfers may also save overall income taxes for a family, when income-producing property is transferred to family members in lower income tax brackets (who are not subject to the “kiddie tax”.)

Tuition and Medical Gifts

Individuals can make unlimited gifts on behalf of others by paying their tuition costs directly to the school or their medical expenses directly to the health care provider (including the payment of health insurance premiums).

Lifetime Utilization of New Transfer Tax Exemption

The ability to transfer $5,430,000 ($10,860,000 per married couple) – after annual exclusion and medical and tuition gifts, and without having to pay gift taxes – paves the way for many planning opportunities.  When combined with valuation discounts and leveraging strategies (e.g., family partnerships, sales to grantor trusts, grantor retained annuity trusts,  etc.), tremendous amounts of wealth may pass for the benefit of many generations free of federal and Illinois transfer taxes. Lifetime gifts utilizing the exemption amounts will almost always result in overall transfer tax savings (unless the assets which have been transferred decline in value). The main reason is the removal of the income and growth on the gifted assets from the taxable estate.

For individuals who fully used their transfer tax exemptions in prior years, consideration should be given to making gifts of the additional inflation adjusted amount (i.e., the $90,000 increase in the transfer tax exemption from 2013 to 2014, and an additional $90,000 increase in the exemption from 2014 to 2015).

Benefits of Acting Early. The main benefit of making gifts that utilize the transfer tax exemption is to remove from the taxable estate the income and appreciation on those assets from the date of the gift to the date of death. The sooner the gifts are made, the more likely that additional income and growth on such assets will escape taxation.

Gifts in Trust. Despite the tax savings, many individuals are uneasy about making outright gifts to their descendants. Such concerns are usually addressed by structuring the gifts in trust, which allows the donor to determine how the assets will be used and when the descendants will receive the funds. The use of gift trusts can also provide the beneficiaries with a level of creditor protection (including protection from a divorcing spouse) and additional transfer tax leverage. This is particularly effective when coupled with applying GST exemption to the trust (discussed above) and making the trust a “grantor trust” for income tax purposes (discussed below).

Many individuals may not be comfortable giving away significant amounts of wealth. However, the gift trust technique is not limited to trusts for descendants, but may also include a spouse as a beneficiary (or as the sole primary beneficiary).  Making the spouse a beneficiary of a gift trust (generally referred to as a spousal lifetime access trust, or “SLAT”) provides indirect access to the trust assets, while allowing the income and growth to accumulate in the trust (if not otherwise needed), and pass free of estate and gift taxes.

One of the most powerful estate planning strategies is the utilization of a “grantor trust.”  Significant additional transfer tax benefits can be obtained by structuring a gift trust as a “grantor trust” for income tax purposes. The creator (or “grantor”) of a “grantor trust” is required to report and pay the tax on the income earned by the trust. This allows the grantor to pass additional funds to the trust beneficiaries free of gift and estate taxes and income taxes, as the grantor’s payment of the trust’s income taxes each year would be considered his or her legal obligation and would not be considered additional gifts.

Taxable Gifts

Although individuals generally dislike paying taxes, making taxable gifts and paying a gift tax may prove to be beneficial.  While the federal government imposes a 40% estate tax on taxable estates and a corresponding 40% gift tax on taxable gifts, Illinois does not impose a gift tax. Thus, taxable gifts result in an overall savings of state estate and gift tax.  Moreover, the differing manner in which the gift and estate taxes are computed and paid results in overall transfer tax savings.

The gift and estate tax, although “unified,” work quite differently. The estate tax is “tax inclusive:” the tax is determined based upon the assets owned at death, and paid from those assets (similar to the income tax, which “after tax” dollars must be used to pay the tax). However, the gift tax is “tax exclusive:” the gift tax is determined based on the assets gifted, and paid from other assets owned by the donor. As an example, if you previously used your transfer tax exemption and then make a $1,000,000 gift you would incur a $400,000 gift tax, $1,400,000 will be removed from your estate, and the donees will receive $1,000,000.  However, if you die without making the $1,000,000 gift, you would have the full $1,400,000 included in your estate, resulting in approximately $676,000 of federal and Illinois estate taxes, leaving only $724,000 rather than $1,000,000 for your descendants. In order to leave $1,000,000 for your descendants at death you would need approximately $1,934,000. The estate tax on such amount would be approximately $934,667, leaving $1,000,000 for your descendants. Stated another way, by gifting assets the IRS gets 40¢ for each $1.00 your beneficiaries receive, but by dying with the assets the IRS gets 93¢ for each $1.00 your beneficiaries receive. However, there are also potential downsides: paying a tax earlier than otherwise may be needed, the possibility that the estate tax may be repealed or the rates reduced, the loss of income/growth on assets used to pay the gift tax, the possibility that the transfer tax exemption may be increased which would have allowed the gifts to pass tax free, etc.

Making Use of Historically Low Interest Rates

Interest rates remain very low (with increases likely on the horizon). The current (and historically low) interest rates continue to create an environment ripe for estate planning and transferring wealth to descendants on a tax-advantaged basis.  Techniques such as grantor retained annuity trusts (“GRATs”), charitable lead trusts (“CLTs”), intra-family loans (bearing the minimal interest in order to avoid a gift of 0.39% for loans of 3 years or less, 1.90% for loans of 3 to 9 years, and 2.91% for loans of 9 years or more as of November 2014), and sales to “grantor trusts” are sensitive to interest rate changes – and are very beneficial in a low interest rate environment.

Illinois QTIP

Given the disparity between the $5,340,000 federal estate tax exemption and the $4,000,000 Illinois estate tax exemption, married couples domiciled in Illinois should make certain that their estate plans are structured to take advantage of the Illinois QTIP marital deduction.  Otherwise, an estate plan that is designed to fully utilize the federal $5,340,000 exemption can inadvertently cause a $382,857 Illinois estate tax upon the death of the first spouse.

Net Investment Income (Medicare) Tax

Higher-income-earners should also plan for the 3.8% surtax on certain unearned income and the additional 0.9% Medicare tax that applies to individuals earning in excess of $200,000 ($250,000 for married couples filing jointly and $125,000 for married couples filing separately.) While the 0.9% additional tax on wages is only imposed on individuals, the 3.8% tax on net investment income is imposed on individuals, estates and trusts. Individuals are only subject to this new 3.8% Medicare tax if their “modified adjusted gross income” exceeds $250,000 for joint filers ($125,000 for a married individual filing a separate return) and $200,000 for single individuals.  In 2014, trusts and estates are subject to this tax at a $12,150 threshold ($12,300 in 2015). The approach to minimizing or eliminating the 3.8% surtax depends on each taxpayer’s individual situation. Some taxpayers should consider ways to minimize (e.g., through deferral) additional net investment income for the balance of the year, while others should review whether they can reduce modified adjusted gross income other than unearned income. In contrast, others may want to accelerate net investment income and/or modified adjusted gross income that would be received next year so that it is included this year (e.g., to take advantage of deductions this year). Year-end planning (such as timing the receipt of net investment income, the receipt of modified adjusted gross income and the payment of deductible expenses) can save significant taxes.

Retirement Plans and Beneficiary Designations

Contribution limitations for pension plan and other retirement accounts for 2015 were recently released by the IRS.  The following adjustments were triggered by an increase in the cost-of-living index:

  • Elective deferral contribution limits for employees who participate in a 401(k), 403(b) and 457(b) plans increased from $17,500 in 2014 to $18,000 in 2015.
  • The catch-up contribution limit for employees (aged 50 or older) who participate in a 401(k), 403(b) and governmental 457(b) plans increased from $5,500 in 2014 to $6,000 in 2015.

The end of the year is a good time to review the beneficiary designations on your pension plan and other retirement accounts (as well as life insurance policies).  Failing to name beneficiaries or keep designations current to reflect changing circumstances can create substantial difficulties and expense (both emotionally and financially) – and may lead to unintended estate, gift and income tax consequences.  You should make certain to designate beneficiaries when participating in a new retirement plan and update beneficiary designations when circumstances dictate (e.g., death of a spouse).  Finally, it is prudent to maintain a current list of accounts with beneficiary designations – which specifies the type of asset, account numbers, account custodians/administrators and beneficiaries designated for each account (primary and contingent).

ARTICLE BY

Gregg M. Simon
OF
Much Shelist, P.C.

Illinois Guaranty Fund Gets Setoff From Statutory Dram Shop Limit Rather Than Jury Verdict

Heyl Royster Law firm

Eighteen-year-old boy was killed in a head-on collision with a vehicle driven by an intoxicated person. His parents received $26,550 from the drunk driver’s insurance carrier and $80,000 from their own insurance carrier. They subsequently filed a dram shop suit. While it was pending, the dram shop’s insurance carrier was declared insolvent, and the Illinois Guaranty Fund assumed the defense. The issue was whether the $106,550 should be set off from a potential jury verdict or from the statutory dram shop limit of $130,338.51. The Fifth District held the setoff should be applied against the jury verdict.

The Supreme Court reversed and held the setoff should be applied against the statutory limit. The Fund’s obligation cannot be expanded by a jury verdict. It can only be reduced by other insurance. Rogers v. Imeri, 2013 IL 115860.

© 2014 Heyl, Royster, Voelker & Allen, P.C
ARTICLE BY

Insurance Coverage Practice Group
OF
Heyl, Royster, Voelker & Allen, P.C.

Vacation Policy Pitfalls for Illinois Employers

FINAL SW logo wLLP2

The Illinois Wage Payment and Collection Act, 820 ILCS 115/1, et seq., governs the payment of wages—including vacation pay—in Illinois.  While most employers understand that they must pay their workers on a regular basis for the wages the employees have earned, many do not consider how vacation policies may create a heightened risk of a wage class action lawsuit.

Simply put, employers must pay the wages earned by an employee at least semi-monthly, or no more than 13 days after they are first earned.  Departing employees must be paid all earned wages by the next regular pay period.  The Act defines wages to include vacation pay.  This is where things can get tricky.  An employer is not obliged to provide any vacation time to its employees.  However, once it chooses to provide vacation, the vacation time becomes earned wages that must be paid under the Act to the employee, even if the employee terminates their employment.

Employees receive vacation time in one of two ways.  First, an employer can award vacation time without requiring employees to first work some period of time.  Such a policy is called an “inducement for future service” policy and immediately vests.  Hence, employees may take vacation time under an “inducement for future service” policy without meeting any length of service criteria (and with no obligation to repay the vacation time should the employment end).  Such “inducement for future service” policies are unusual.

The other alternative is where the vacation is earned based on service.  For example, the employer can award two weeks of vacation for each year of employment.  This is considered a “length-of-service” policy and the law requires that employees earn “length-of-service” vacation time on a pro rata basis, even where the employer’s policy says they do not.  In other words, the vacation time vests as the employee works.  Thus, an employee who would earn two weeks of vacation after completing a year of employment is entitled to be paid for one week of vacation wages if he/she leaves the employer six months into the year, regardless of what the employer’s policy says.  Most employers have “length-of-service” policies.

An employer with a “length-of-service” policy must pay a departing employee the vacation wages they earned on a pro rata basis.  This is where a vacation policy can become dangerous.  If the employer has a policy that an employee only gets their vacation if they are employed in the following year, the employer is at risk with regard to every employee who left or, in the future leaves, its employment without getting paid vacation pay on a pro rata basis.  Such policy flaws lend themselves to class action lawsuits because the employer’s liability to the class will usually turn on a single question, such as whether the vacation policy is legal or not.

A class action lawsuit can be filed by one departing employee on behalf of all employees who left the employment without getting vacation pay.  A class action lawsuit is dangerous because it aggregates all employees’ claims into a single lawsuit brought by just the class representative.  In 2010, the Illinois legislature amended the statute of limitations under the Act to allow a class representative to file on behalf of a class that goes back in time up to ten years.  Because of the large number of unnamed, but represented, employees that can be in a class, the situation can create potentially disastrous financial exposure for an employer.  And, if the representative employee prevails, she is entitled to recover from the employer her attorneys’ fees, which are usually substantial.  As if this were not enough, the 2010 amendment also permits employees to collect damages of two percent per month—of 24 percent per annum—on any unpaid wages.  Willful refusals to pay wages can also be criminal.

Even if the class action lawsuit settles for a set amount of money, the employer usually must also pay the class representative’s attorneys’ fees.  Under the 2010 amendment, a prevailing employee is entitled to recover her attorneys’ fees, even she did not file her case as a class action.

Recognizing the risk, some employers have tried to limit their exposure by requiring that employees sign an agreement that they will make any claims within a short period of time—for example, six months.  Importantly, the plaintiffs’ bar and the Illinois Department of Labor take the position that the Act prevents an employee from agreeing to limit any of the rights bestowed on the employee by the Act.  Thus, an employee’s written agreement that they will bring any claims for unpaid wages within six months is unenforceable as a matter of public policy.

Employers should be careful to ensure that their policies comply with each state law in which they have employees, including the 2010 amendments to the Act.  If an employer is unfortunately named in a class action lawsuit, they should promptly seek legal advice from a law firm with experience in defending against class action lawsuits.

Copyright 2014 Schopf & Weiss LLP
ARTICLE BY

Insurance Coverage Practice Group
OF
Heyl, Royster, Voelker & Allen, P.C.

Cameras Coming to an Illinois Courtroom Near You: What Are the Rules and What Impact Might They Have

Heyl Royster Law firm

Probably everyone saw portions of the O.J. Simpson and George Zimmerman trials, because each was a high profile case broadcasted on live television. Now, cameras are coming to Illinois courtrooms.

In January 2012, the Illinois Supreme Court approved the use of“extended media coverage” in the courtrooms of judicial circuits that applied for such coverage and received approval. “Extended media coverage” essentially means the use of still cameras, video cameras, and audio recording. Over time, 40 Illinois counties have applied for and received approval to allow extended media coverage in their courtrooms.

Attorneys and clients must familiarize themselves with the applicable rules for extended media coverage, and must consider and prepare for the practical implications if cameras will be present at trial. While such media coverage will likely be limited to criminal cases in most instances, it will inevitably occur in high profile civil cases, including some medical malpractice cases. And, if extended media coverage proves to benefit one side or the other over time, attorneys representing those parties will undoubtedly push for more and more coverage.

Who or What is Considered “Media”?

Historically, the media may have been thought of as newspapers and television stations. Today, however, the term media may include biased blogs, social media, or other similar internet media that does not follow basic standards of journalism. Luckily, Illinois rules operate with a more historical definition of media, thus limiting who may request to cover the trial and hopefully ensuring a certain amount of fairness in reporting. In order to be credentialed under the rules, a media member or organization must be regularly engaged in news gathering and reporting, cover judicial proceedings on a consistent basis, and must regularly follow basic journalistic standards for ethics, accuracy and objectivity.

Request for Extended Media Coverage

Extended media coverage is not allowed as of right. Instead, a credentialed media member must make a written request and have that request granted by the court before extended media coverage is allowed. The request for media coverage must be made at least 14 days before the trial or hearing the media member wishes to cover. Further, the written request must be provided to all attorneys. The 14 day requirement allows the defense time to consider the request and make appropriate objections prior to the trial or hearing.

Objection to Extended Media Coverage

Objections to extended media coverage may be raised by the parties to the lawsuit and may also be raised by witnesses. In either case, a written objection is required, but the timing of the objection can differ for parties and witnesses. If a party, i.e. plaintiff or defendant, wishes to object, his written objection must be filed at least 3 days before the beginning of the trial or hearing. Witnesses must be advised by the attorney presenting their testimony of the right to object, and the witness must file his objection before the beginning of the trial or hearing. The rule also allows the judge to exercise discretion to consider objections that do not comport with the timing requirements.

Once an objection to extended media coverage has been made, the judge may rule on the basis of the written objection alone, or he may choose to hear evidence. At his discretion, the judge may choose to hear evidence from a party, witness, or media coordinator before ruling.

It would be inadvisable to object to media coverage in a trial where no member of the media has made a written request for coverage. Such a pre-emptive motion would be likely to draw media interest where none previously existed.

Technical Requirements and Sharing Equipment

Technical requirements for the cameras and other equipment are provided in the rules. The overall theme of these rules is to ensure that any equipment is not obstructive or disruptive during the trial or hearing. The equipment cannot produce distracting lights or noises during operation. Further, no flashbulbs or other lighting may be used to aid the cameras.

The rules limit the amount of equipment allowed in the courtroom, again with the overall goal of limiting obstructions and distractions. A maximum of two still cameras and two television cameras are allowed, but the judge may choose to limit that to only one still camera and one television camera. Only one audio recording system is permitted. Obviously, if multiple media outlets wish to cover the trial or hearing, they may be required to share the video and audio stream under the rules.

What May be Filmed or Photographed

Most trials and other hearings may be recorded, with exceptions limited mostly to the area of family law. Importantly though, several portions of the trial cannot be recorded. Jury selection cannot be recorded at all, and the media is forbidden from filming or photographing individual jurors or the jury as a whole. This is an important protection provided in the rule, because if a juror is assured that he cannot be recorded, the juror should feel less inclined to consider public opinion in deciding the case. Further, the media may not record interactions between the lawyer and client, between opposing lawyers, or between the judge and the lawyers, i.e. sidebars. And, no materials, papers or exhibits can be recorded unless they are admitted to evidence or shown to the jury. These limitations are obviously important to protect the confidential attorney-client relationship, among other things. Finally, no filming is allowed during recesses or in the public areas or hallways, which provides some known off-camera time.

Live Blogging

A judge also has discretion to allow live blogging during a trial or other proceeding, which does not include visual or audio recording. The most typical example of live blogging would be tweeting, but includes any transmittal in text form of testimony, proceedings, and summaries from the courtroom. Again, only credentialed news media are allowed to engage in live blogging.

The rule allowing for live blogging simply says that it may be allowed upon request. It does not provide a time-period within which the request must be made, and does not provide for objections. However, the decision to allow live blogging is left to the “absolute discretion” of the judge, and therefore, it seems reasonable that a judge would also be vested with the authority to allow objections and consider whatever he deems necessary. In any event, an objection can always be stated on the record, whether or not the judge chooses to consider it.

Required Jury Admonishment and Jury Instruction

Jurors cannot be photographed or filmed, with the apparent goal of minimizing any influence or consideration of public opinion. Carrying this theme further, the rules require the trial judge to read an admonishment to the jury at the beginning of the trial and an instruction to the jury at the conclusion of trial regarding the media coverage. Of course, the admonishment and instruction advise the jury that they should not be influenced by or draw inferences based upon the presence of the media. Also, importantly, the admonishment advises the jury they cannot be photographed or filmed as a group or individually, and it advises the jurors to inform the court if the cameras are distracting or cause an inability to concentrate.

Practical Considerations and Potential Effects

At the outset, the lawyer and client should consider whether they do or do not want cameras in the courtroom. In most cases, the defense would prefer cameras not be present so that the trial is focused exclusively on liability and damages, not extraneous issues. If a request for extended media coverage is made, the lawyer and client should ask themselves why the request is being made, and whether a written objection should be filed. If an objection will be filed, however, it should be based upon specific facts or concerns in that case. The Illinois Supreme Court and local judicial circuit have already determined, from a policy standpoint, that cameras should be allowed if the rules are complied with. Therefore, objections based upon general concerns that cameras may be disruptive or may have a negative impact on the jury are likely to fail.

Conclusion

While most defendants and their lawyers are opposed to cameras in the courtroom, it appears that they are here to stay for the foreseeable future. Given the national trend toward cameras in the courtroom and instantaneous media, it’s hard to imagine that these rules will ever be reversed. Therefore, attorneys and clients will need to carefully consider how to operate within the rules in a way that most favors the presentation of their case.

ARTICLE BY

Matthew Thompson
OF
Heyl, Royster, Voelker & Allen, P.C.

Illinois Bans Employment Application Questions About Criminal Convictions

Vedder Price Law Firm

On July 21, 2014, Illinois Governor Pat Quinn signed into law the Job Opportunities for Qualified Applicants Act (HB 5701), which generally prohibits private-sector employers from inquiring about an applicant’s criminal history on a job application. When this law goes into effect on January 1, 2015, Illinois will join Hawaii, Massachusetts, Minnesota and Rhode Island as the fifth state to enact a “ban the box” law applicable to private-sector employers. A number of municipalities, including Philadelphia and San Francisco, have passed similar laws prohibiting the use of check-this-box questions on employment applications inquiring about an applicant’s criminal history.

The new Illinois law applies to private-sector employers with 15 or more employees and to employment agencies. The law prohibits covered employers from asking about an applicant’s criminal record or criminal history until after the employer has deemed the applicant qualified for the position and scheduled an interview. If hiring decisions are made without an interview, then the employer may not inquire about an applicant’s criminal record or history until it has made a conditional offer of employment to the applicant.

These restrictions do not apply to positions (a) for which federal or state law prohibits the employment of individuals who have been convicted of certain crimes or (b) for which individuals are licensed under the Emergency Medical Services Systems Act. In addition, a more limited exception applies to positions requiring a fidelity bond.

Employers with Illinois operations should plan to review the employment application forms they use and make necessary changes this fall in advance of the law’s effective date of January 1, 2015. For most covered employers, this will involve postponing until later in the hiring process the time at which questions are asked about prior criminal convictions.

Article By:

Brandon L. Dixon
Thomas G. Hancuch
Of:
Vedder Price