Author: National Law Forum

A group of in-house attorneys developed the National Law Review on-line edition to create an easy to use resource to capture legal trends and news as they first start to emerge. We were looking for a better way to organize, vet and easily retrieve all the updates that were being sent to us on a daily basis.In the process, we’ve become one of the highest volume business law websites in the U.S. Today, the National Law Review’s seasoned editors screen and classify breaking news and analysis authored by recognized legal professionals and our own journalists. There is no log in to access the database and new articles are added hourly. The National Law Review revolutionized legal publication in 1888 and this cutting-edge tradition continues today.

IRS Process for Withdrawing Employee Retention Credit Claims

On October 19, 2023, the IRS announced a process which is intended to allow employers who were pressured or misled by marketers or promoters into filing ineligible claims for the Employee Retention Credit (ERC), but who have not yet received a refund, to withdraw their claim. This process permits employers whose ERC claims are still being processed to withdraw their refund claims and avoid the potential that the IRS would deny the claim after the credit is received, thus avoiding the need to repay any refunded amounts, and avoiding potential interest and penalties.

When properly claimed, the ERC is a refundable tax credit designed for employers that were fully shut down or partially suspended due to the COVID-19 pandemic or that had a significant decline in gross receipts during the eligibility periods.

The move to permit the withdrawal of claims comes after the IRS placed abusive ERC promotions on its Dirty Dozen, an annual list aimed at helping raise awareness to protect honest taxpayers from aggressive promoters and con artists. After placing abusive ERC promotions on the Dirty Dozen, on September 14, 2023, the Commissioner of the IRS ordered that processing of any new ERC claims be stopped until December 31, 2023. However, the IRS stated that it would continue to process and pay out previously filed eligible ERC claims, as well as audit ERC claims and pursue criminal investigations of promoters and businesses filing dubious claims.

Who Can Withdraw an ERC Claim
To be eligible to withdraw an ERC claim, an employer must meet all of the following criteria:

  1. The ERC must have been claimed using an adjusted employment return, i.e. Forms 941-X, 943-X, 944-X, or CT-1X
  2. The ERC must be the only adjustment claimed on the return
  3. The employer must withdraw the entire amount of the ERC claim (this refers to each calendar quarter, rather than all calendar quarters, for which an ERC claim was made)
  4. The ERC claim cannot have been paid by the IRS or, if it has been paid, the employer has not yet cashed or deposited the refund check

How to Withdraw an ERC Claim

The notice provides a step-by-step menu for withdrawing a claim.  If the employer filed adjusted returns to claim ERCs for more than one calendar quarter and wishes to withdraw all ERC claims, it must follow the steps below for each calendar quarter for which it is requesting a withdrawal.  The IRS also has a dedicated page with sample form, which can be found here.

Employers that have not received a refund and have not been notified their claim is under audit may request a withdrawal by following these steps:

  1. Make a copy of the adjusted return with the claim you wish to withdraw
  2. In the left margin of the first page, write “Withdrawn”
  3. In the right margin of the first page:
    • Have an authorized person sign and date it
    • Write their name and title next to their signature
  4. Fax the signed copy of your return using your computer or mobile device to the IRS’s ERC claim withdrawal fax line at 855-738-7609.  The employer should keep a copy with its tax records.  The notice even provides a template for a simple claim withdrawal request.

Employers that have not received a refund and have been notified of an audit can still withdraw ERC claims using the above procedure, but must check with their examiner about how to fax or mail the withdrawal request directly to the examiner or, if an examiner has not yet been assigned, should respond to the audit notice with the withdrawal request, using the instructions in the notice for responding.

Special instructions are also included in the notice for employers that have received a refund check but have not cashed or deposited it.

Once a withdrawal is submitted, the employer should expect to receive a letter from the IRS about whether their withdrawal request was accepted or rejected.  A withdrawal is not effective until accepted by the IRS.  If the IRS accepts the withdrawal, the employer may need to amend its income tax return (if it previously amended that return to reflect ERCs that had been claimed).

ERC Refunds Already Received

Employers that are not able use the above withdrawal process may still be able to file another adjusted return if they need to:

  • Reduce the amount of their ERC claim
  • Make other changes to their adjusted return

However, it should be noted that the IRS is also working on separate guidance for ineligible employers that were misled into making ERC claims and have already received the payment.

Continued Risk for Fraudulent Claims

Withdrawn ERC claims will be treated as if they were never filed and the IRS will not impose penalties or interest.  However, ineligible employers should note that withdrawing an ERC claim will not remove the possibility that they or their advisor could be subject to potential criminal investigation or prosecution for filing a fraudulent ERC claim.

Copyright ©2023 Nelson Mullins Riley & Scarborough LLP
For more news on Employee Retention Claims, visit the NLR Labor & Employment section.

Study: Vehicles with Higher Front Ends Pose Greater Risk to Pedestrians

According to a recently published study by the Insurance Institute for Highway Safety (IIHS), vehicles with higher, more blunt front ends are more dangerous to pedestrians. IIHS says that vehicles with a hood height higher than 40 inches are 45% more likely to cause fatalities in pedestrian accidents than vehicles with a hood height of 30 inches or less.

Pedestrian accident deaths have risen 80% since their lowest point in 2009. In 2021, more than 20 people died per day after being hit by a vehicle.

Over the last 30 years, the average vehicle has gotten about 4 inches wider, 10 inches longer, 8 inches taller, and 1,000 pounds heavier in the US. Many vehicles are more than 40 inches tall at the leading edge of the hood.

The IIHS study examined 17,897 crashes involving a single passenger vehicle and a single pedestrian. Using Vehicle Identification Numbers to identify the vehicles, they calculated front-end measurements corresponding to 2,958 unique car, minivan, large van, SUV, and pickup models. Vehicles with pedestrian automatic emergency braking systems were excluded from the study, along with others that could affect the likelihood of a fatality, such as speed limit, and age of the struck pedestrian.

Front-End Height affects Fatalities

The study found that vehicles with hoods more than 40 inches off the ground at the leading edge and a grille sloped at an angle of 65 degrees or less, were 45% more likely to cause pedestrian fatalities than those with a similar slope and hood heights of 30 inches or less. Vehicles with hood heights of more than 40 inches and blunt front end angled at greater than 65 degrees were 44% more likely to cause fatalities.

Researchers looked at several other vehicle characteristics, including the angle of the windshield, the length of the hood, and the angle of the hood. Among these, the slope of the hood had the biggest effect. There was a 25% increase in the risk of fatality for vehicles with flat hoods (those with angles of 15 degrees or less) compared to vehicles with more sloping hoods.

Researchers found that vehicles taller than 35 inches were more dangerous to pedestrians because they tend to cause more severe head injuries. Of the vehicles taller than 35 inches, those with more blunt front ends were more dangerous than those with sloped front ends, because they cause more frequent and severe torso and hip injuries.

“Manufacturers can make vehicles less dangerous to pedestrians by lowering the front end of the hood and angling the grille and hood to create a sloped profile,” IIHS Senior Research Transportation Engineer Wen Hu, the lead author of the study, said in a statement on Tuesday. “There’s no functional benefit to these massive, blocky fronts.”

Buckfire & Buckfire, P.C. 2023
For more news on Vehicular Safety, visit the NLR Insurance Reinsurance & Surety section.

European Citizens Sue States for Breach of Human Rights Resulting from Failure to Take Stronger Climate Action

On September 27, 2023, six “Portuguese young people” were heard by the European Court of Human Rights (ECtHR) in a lawsuit against 32 European governments, including all EU member states, alleging that their failure to act fast enough against climate change has violated the applicants’ human rights to life, physical and mental wellbeing. The applicants claim that the respondents are failing to fulfil their obligations under the Paris Agreement to limit global warming.

The original application cites a number of contributions to climate change made by the respondent states: (i) permitting the release of emissions within national territory and offshore areas over which they have jurisdiction; (ii) permitting the export of fossil fuels extracted on their territory; (iii) permitting the import of goods, the production of which involves the release of emissions into the atmosphere; and (iv) permitting organizations within their jurisdiction to contribute to the release of emissions overseas. Taken together, the applicants say, the respondents have contributed to climate change and, while mitigation measures have been adopted, contributions to adverse climate change continues. The applicants are seeking an order from ECtHR requiring the respondent governments to take more ambitious action.

Describing the impact on them, the applicants say that climate change has contributed to harm to human health. In an expert report commissioned to supplement their application, the applicants say that Portugal is already experiencing the impact of climate change, including an increase in mean and extreme high temperatures, with heatwaves becoming more frequent. As a result, the region is also prone to wildfires – 120 people died and 500,000 hectares of land were burned during wildfires preceded by heatwaves. Responding to the application, a lawyer on behalf of Greece claimed that climate change cannot be directly linked to an adverse impact on human health, stating “[the] effects of climate change, as recorded so far, do not seem to directly affect human life or human health.” Lawyers on behalf of Portugal stated that the applicants failed to provide evidence of the specific damages caused by climate change on their lives.

The case was originally filed in September 2020. The September 27 hearing was one of the largest before the ECtHR, with 22 judges and 86 government lawyers, and took place following one of the hottest summers on record in Europe. A decision is expected in 2024.

Taking the Temperature: The claims made in this case echo certain conclusions reached in the United Nations’ first global stocktake on parties’ achievements under the Paris Agreement. The UN acknowledged that although significant progress has been made, there is a crucial need for nations to significantly enhance their clean energy ambitions if they are to achieve their Paris-aligned objectives.

In July 2023, we discussed the Grantham Institute’s report on trends in climate litigation and the types of strategies being employed by claimants. One of these included so-called government framework actions in which plaintiffs focus on a government’s response to climate change and potentially, its failure to implement policies or legislation. The case brought by the six Portuguese young people falls squarely within this category.

In June 2023, we discussed the lawsuit filed by, among others, Greenpeace and 12 Italian citizens against ENI S.p.A. alleging that ENI knew of the detrimental effect of fossil fuel burning since around 1970 but through “lobbying and greenwashing” continued to encourage extraction, thereby contributing to climate change, and violating the citizens’ rights to life, health and private and family life. In March of this year, a group of Swiss citizens accused the Swiss government of infringing on the right to life and health of elderly women via its climate-related policies. The case is pending in the European Court of Human Rights.

Comparable cases have also been filed in the U.S. In Montana, 16 residents—ranging from ages 2 to 18—commenced litigation claiming that they “have been and will continue to be harmed by the dangerous impacts of fossil fuels and the climate crisis,” and that the defendants have violated the Montana Constitution by fostering and supporting fossil fuel-based energy policies in the state that led to these conditions. In September this year, the court struck down on state constitutional grounds certain provisions of the Montana Environmental Policy Act (MEPA), which restricted Montana from incorporating the impact of greenhouse gas emissions or other forms of climate change in environmental reviews. Similar constitution-based climate-related suits against state governments are pending in other U.S. states.

© Copyright 2023 Cadwalader, Wickersham & Taft LLP
By Jason M. Halper , Sharon Takhar of Cadwalader, Wickersham & Taft LLP
For more news on Climate Change Human Rights Violations, visit the NLR Environmental, Energy & Resources section.

NYC Council Passed Bill to Require Added Sugar Icons for Chain Restaurant Menu Items

  • On November 2, the New York City Council passed a bill that will require chain restaurants with 15 or more locations to post added sugar icons and factual warning statements on menus or menu boards next to menu items and on or near food items on display that exceed a specified level of added sugars. The icon must be displayed on food items that exceed 100% or more of the daily value for added sugars as determined by the FDA (i.e., 50g) or another amount as specified by the Department of Health and Mental Hygiene (DOHMH).
  • This new legislation, Int 0687-2022, builds on the “Sweet Truth Act,” which was passed in 2021 and requires the same added sugar notifications on certain prepackaged food items at covered NYC establishments.
  • The bill has been sent to the Mayor for a hearing and signature, to be held on November 17. If signed, covered establishments will be required to display the added sugar icons no later than one year after the DOHMH issues its rules for the bill. Any covered restaurant that violates the provisions of the bill is liable for a civil penalty of $200.
© 2023 Keller and Heckman LLP
For more news on Added Sugar Notifications, visit the NLR Biotech, Food, Drug section.

Surge in Class Actions Under the Illinois Genetic Information Privacy Act

This year has seen a substantial increase in the number of class action lawsuits filed against employers under the Illinois Genetic Information Privacy Act (GIPA). More than 20 suits have been filed this year, a stark contrast to zero filed in 2022 and only two in 2021.

Like its federal counterpart the Genetic Information Nondiscrimination Act (GINA), GIPA prohibits employers, and agents acting on their behalf, from “directly or indirectly” soliciting, requesting, requiring or purchasing genetic information from a person as a condition of employment or from using genetic information in a discriminatory manner against an employee or applicant. Genetic information is defined to include information from genetic tests or the manifestation of a disease or disorder of an individual or their family members.

Under the claims filed, plaintiffs allege that during the hiring process prospective employers collected family medical history and required pre-employment physicals or health interviews, which sought the protected information. These exams and interviews were often conducted by third-party occupational health services providers. The damages sought included “statutory damages” under the Act of $15,000 for each intentional and/or reckless violation and $2,500 for each negligent violation. In addition, GIPA has no statutory cap on punitive or compensatory damages and no statute of limitations, exposing employers to potentially massive damage awards.

Because these cases are in their infancy and currently only in Illinois, there is little guidance on the scope of GIPA and any exceptions that may exist. This means that we will need to wait and see how courts will interpret the Act and what impact the cases will have beyond Illinois.

In light of these developments, all employers should consider the following:

  • Disclaimer Use on Authorizations and Information Packets: Consider adding a written disclaimer to any authorization and pre-employment questionnaires that requests applicants not to provide any genetic information when responding to requests for medical information. The disclaimer should be provided to the applicant/employee for their information.
  • Review Third-party Provider Practices: Evaluate the practices of third-party medical providers, including documents provided to applicants/employees in their evaluation process, and request that family medical history not be obtained.
  • Assess Contracts/Indemnification Obligations: Review and assess the indemnification provisions of contracts with third-party medical providers. It is important that the hold harmless and indemnification obligations of the provider include reference to GIPA obligations in the scope of protection for the employer.
©2023 von Briesen & Roper, s.c
For more news on the Illinois Genetic Information Privacy Act, visit the NLR Labor & Employment section.

WOTUS Whiplash 4.3: The Revision to the Revised Definition of “Waters of the United States”

The third major development of 2023 for defining “Waters of the United States” (“WOTUS”) has arrived.

First, in early 2023, the United States Environmental Protection Agency (“EPA”) and the United States Army Corps of Engineers (“USACE”)(together, the “Agencies”) revised the definition of “Waters of the United States” (the “2023 Rule”). This definition controls which water resources qualify for federal protection under the Clean Water Act (“CWA”) (see WOTUS Whiplash 4.0 for a description of the 2023 Rule). Second, in May, the United States Supreme Court released its Sackett v. EPA decision. Third (and likely the final WOTUS milestone of the year), the Agencies recently issued yet another revised WOTUS definition in light of Sackett.  This article breaks down the Supreme Court’s impactful Sackett decision, the Agencies’ corresponding 2023 Rule revision, and the consequences of such changes for states like North Carolina – which is simultaneously undergoing state environmental statutory changes.

The Regulatory Landscape Pre-Sackett

Before Sackett, the Supreme Court’s Rapanos decision controlled whether wetlands separated from a recognized WOTUS by a natural or man-made barrier fell under CWA jurisdiction.  If they did, impacts to those wetlands required a permit from the USACE under Section 404 of the CWA.  In Rapanos, the Court failed to reach a coherent majority decision.  Justice Scalia drafted the four-justice plurality opinion, holding that WOTUS included: (1) only those waters that are “relatively permanent, standing, or continuous[ly] flowing” such as streams, rivers, and lakes; and (2) only those wetlands that share a continuous surface connection with such waters.  But Justice Kennedy, who cast the deciding vote in Rapanos, created a different test. This test, which became the most commonly cited rule for WOTUS, assessed whether a wetland possessed a “significant nexus” to a recognized WOTUS.  This “significant nexus” test extended CWA protections to wetlands that “either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity of other covered waters . . . .”

In addition, pre-Sackett, the Agencies adopted WOTUS definitions in various rules, manuals and policies that, like Justice Kennedy’s “significant nexus” test, considered “adjacent wetlands” to be jurisdictional—including those that are “separated from other waters of the United States by man-made dikes or barriers, natural river berms, beach dunes and the like.”  When the Agencies issued the 2023 Rule, they basically combined Scalia’s Rapanos approach (putting relatively permanent tributaries and streams back under federal jurisdiction through continuous surface connections) with Kennedy’s Rapanos approach (applying the “significant nexus” test to non-navigable tributaries and adjacent wetlands).  The Agencies published the 2023 Rule knowing that the Supreme Court would soon thereafter issue an opinion in Sackett, which was argued in October 2022.

Sackett v. EPA

The Sacketts sued the EPA in 2008 over whether they had violated the CWA by backfilling a wetland on their property without a Section 404 permit from USACE.  The EPA argued that this wetland shared a significant nexus with Priest Lake, a WOTUS separated from the Sacketts’ property by a 30-foot road.  On May 25, 2023, a five-justice majority issued its opinion in Sackett, which greatly limited federal CWA jurisdiction over wetlands nationwide.  The Court found that the Agencies’ rules were inconsistent with the CWA’s text and structure and held that the CWA extends only to those “‘wetlands with a continuous surface connection to bodies that are ‘waters of the United States’ in their own right, so that they are ‘indistinguishable’ from those waters.”  Writing for the majority, Justice Alito concluded that “the CWA’s use of ‘waters’ encompasses ‘only those relatively permanent, standing or continuously flowing bodies of water ‘forming geographic[al] features’ that are described in ordinary parlance as ‘streams, oceans, rivers, and lakes.'”

Under the 2023 Rule, which was not at issue in Sackett, wetlands without a continuous surface connection to a body of water could still be federally protected WOTUS if the wetland had a “significant nexus” to surface waters.  But Sackett  rejected the “significant nexus” test in favor of defining covered wetlands as those that are wet or “wet-lands.” Thus, any WOTUS definition using “adjacency” or “adjoining” to define CWA-protected waters is irrelevant. Instead, there must now be a continuous surface water connection between “wet lands” and the open, navigable-in-fact WOTUS for the federal government to claim jurisdiction.  Wetlands that qualify as WOTUS must be “indistinguishable” from WOTUS and “have a continuous surface connection to bodies that are” WOTUS.

The Regulatory Landscape Post-Sackett

The Agencies responded to Sackett by announcing they would develop new guidelines for determining federal jurisdiction by September 1, 2023.  And they met that unprecedented deadline, taking a scalpel to the 2023 Rule to conform it to Sackett (the “Sackett Rule”). The Agencies removed from the 2023 Rule references to the “significant nexus” test, including deleting from the WOTUS definition interstate wetlands and those tributaries, streams, and wetlands containing a significant nexus to other WOTUS.  They also redefined “adjacent” within the 2023 Rule to no longer include those wetlands separated from WOTUS by certain geographic features and limiting the meaning of “adjacent” to those waters “having a continuous surface connection” to another.

Despite these precise revisions, the Agencies did not define a “continuous surface connection” or a “relatively permanent” body of water under the Sackett Rule.  Thus, lawyers and consultants must make this initial interpretation by picking through the preamble to the 2023 Rule.  And they must wait to see how the Agencies, primarily the USACE, implement the Sackett Rule to wetlands in the field.

Challenges for State Law and Regulation

Although the Sackett Court removed federal protection from wetlands, it acknowledged that the states could provide that protection. Justice Alito pointedly noted that “[r]egulation of land and water use lies at the core of traditional state authority”; because the CWA anticipates a partnership between the states and the federal government, the states “can and will continue to exercise their primary authority to combat water pollution by regulating land and water use.”

And North Carolina exercised its authority to provide greater state protection for its wetlands until June 27, 2023.  On that date, the North Carolina General Assembly overrode a gubernatorial veto to pass Senate Bill 582, entitled “An Act to Make Various Changes to the Agricultural and Wastewater Laws of the State” (the “2023 NC Farm Act”). The 2023 NC Farm Act restricts the state definition of “wetlands” to those “that are waters of the United States as defined by 33 C.F.R. § 328.3 and 40 C.F.R. § 230.3,” i.e., only those WOTUS regulated by the Agencies. The General Assembly directed the Environmental Management Commission (“EMC”), the state rule-making authority, to implement this definition of “wetlands” until the EMC formally adopts a permanent rule to amend the existing definition of wetlands. Until then, wetlands in North Carolina are only those the federal government recognizes and protects as WOTUS, unless a state statute (for example, the Coastal Area Management Act) specifically provides otherwise.

The combination of the Sackett opinion, the 2023 NC Farm Act, and the Sackett Rule cast doubt as to whether the state’s isolated wetlands rules remained in effect, despite having a separate regulatory definition that was not by the 2023 Farm Act.  The EMC Chair requested the North Carolina Department of Environmental Quality (“NCDEQ”) to advise on the assimilation of federal and state definitions.  At the EMC’s meeting in September, the NCDEQ Division of Water Resources (“DWR”) provided an update to the regulated community. It also issued a public notice regarding the implementation of the revised definition of wetlands in the 2023 NC Farm Act, including the following:

  • Where the USACE and a 404 Permit applicant agree that all features on the property are potentially jurisdictional, DWR will process the related state certification required by Section 401 of the CWA.
  • Where there are questions regarding the jurisdictional status of the wetlands, the USACE will evaluate those wetlands under the Sackett Rule. DWR will move forward on these projects once it has a decision from USACE.
  • Isolated wetlands and non-jurisdictional wetland permits will not be necessary for properties that have received Approved Jurisdictional Determinations from the USACE confirming the wetlands are not under the Sackett Rule.

Questions remain as to the specifics of North Carolina’s regulatory jurisdiction of wetlands as State waters. The 2023 NC Farm Bill was introduced before the Sackett opinion was released.  And given the breadth of Sackett, the Bill’s proponents may not have intended the resulting consequences. The filling of unregulated wetlands may result in reduced floodwater mitigation and stormwater filtration, affecting surface water quality and other ecological functions. Counties bearing the brunt of storm impacts increasingly caused by climate change have made gains in resiliency planning.  But those gains may be reduced or eliminated if policymakers do not address the potential loss of wetlands in those counties.

Navigating Uncharted WOTUS

Despite the uncertainty cast over wetlands by Sackett, the 2023 NC Farm Act, and the Sackett Rule, it’s important to remember that the CWA has four other categories of protected waters. And several state laws continue to apply to activities impacting wetlands even if CWA Section 404 permit requirements do not. These include the Sedimentation and Pollution Control Act with respect to enforcement actions for land-disturbing activities and the Coastal Area Management Act for development activities in coastal counties. Since the 2023 Rule was not before the Sackett Court, the conforming Sackett Rule may be exposed to challenges.  Expect to see more guidance from the Agencies as the USACE makes jurisdictional determinations in the field.  Landowners will need to identify the water features on their property to understand what federal and state regulatory programs are at play beyond Section 404 of the CWA. Strategies to manage uncertainty include working with a professional team to consider: preliminary versus approved jurisdictional determinations; state and local requirements; avoidance opportunities; and development plans with built-in flexibility.

© 2023 Ward and Smith, P.A.. All Rights Reserved.
For more news on Defining WOTUS, visit the NLR Environmental, Energy & Resources section.

Probate & Fiduciary Litigation Newsletter – November 2023

Voluntary Personal Representative Is a “Prior Appointment” For Purposes of the Limitation Period for Commencing Formal Probate

In The Matter of the Estate of Patricia Ann Slavin, 492 Mass. 551 (2023)

Does the position of voluntary personal representative under G. L. c. 190B, § 3-1201 constitute a “prior appointment,” which operates to exempt an estate from the requirement contained in G. L. c. 190B, § 3-108 that probate, testacy, and appointment proceedings be filed within three years of a decedent’s death? The Massachusetts Supreme Judicial Court answered this question in the affirmative In The Matter of the Estate of Patricia Ann Slavin, 492 Mass. 551 (2023).

This case arose out of the murder of Patricia Slavin in May 2016 in circumstances allegedly giving rise to claims for wrongful death. A few months after her death, the decedent’s daughter (petitioner) filed a voluntary administration statement in the Probate and Family Court pursuant to § 3-1201 and thereafter became the voluntary personal representative of her mother’s estate. The petitioner’s status as voluntary personal representative allowed her to administer her mother’s small estate without initiating probate proceedings.

More than three years later, the petitioner—having realized her position as voluntary personal representative did not grant her authority to pursue a wrongful death claim—filed a petition for formal probate in the Probate and Family Court seeking court appointment as personal representative. The petitioner argued that the three-year statute of limitations governing probate proceedings was inapplicable because it excepts otherwise untimely filings for estates in which there has been a “prior appointment.” The Probate and Family Court dismissed the petition as untimely, finding that her position as voluntary personal representative did not qualify as a “prior appointment” under the statute. The judge’s decision relied on a procedural guide published by an administrative office of the Probate and Family Court which provided that the authority of a voluntary personal representative does not result in an official appointment by the court.

The SJC granted the petitioner’s application for direct appellate review and held that both the plain language of G. L. c. 190B, §§ 3-108 and 3-1201 and the purpose of the MUPC support the conclusion that the position of voluntary personal representative is indeed a “prior appointment.” The SJC reversed the judgment of dismissal and remanded for further proceedings.

First, the SJC concluded that the plain language of § 3-1201 constitutes an “appointment” given that the register of probate may “issue a certificate of appointment to [a] voluntary personal representative”—language that the SJC refused to consider as mere surplusage. This language plainly contradicted the administrative guide the Probate and Family Court judge relied on. The SJC also considered the plain language of § 3-108, which does not limit the type of “prior appointment” that qualifies for an exception from the statute of limitations.

Second, the SJC held that this conclusion was consistent with the purpose of the ultimate time limit. Section 3-108 is intended to establish a basic limitation period within which it may be determined whether a decedent left a will and to commence administration of an estate. Where a voluntary personal representative has been named, the determination of whether a will exists has been made, and administration of the estate has commenced.

Finally, the SJC held that this interpretation was consistent with the legislature’s goal of “flexible and efficient administration” of estates in that it incentivizes people to continue to utilize voluntary administration for smaller estates without fear that they could not increase their authority beyond three years.

Takeaway: Voluntary administration can be used for administration of smaller estates without risk that the three-year limitation period for commencing formal probate proceedings will bar future probate, testacy, or appointment proceedings, if necessary.

Conformed Copy of Will Not Admitted to Probate

In Matter of Estate of Slezak, 218 A.D.3d 946 (3rd Dep’t July 13, 2023)

Where a conformed copy of a will was located where the decedent said his will could be found, no potential heir contested the validity of the will and testimony established that the will was not revoked, should the conformed copy of the will be admitted to probate? In Matter of Estate of Slezak, 218 A.D.3d 946 (3rd Dep’t July 13, 2023), New York’s Appellate Division, Third Department, answered that question in the negative, indicating how difficult it can be to probate a copy of a will rather than the original

In Slezak, testimony established that the decedent told a witness that his will was in a lockbox under his bed, and that he had left everything to a certain beneficiary. When the lockbox was opened, there was a conformed copy of the will, with the decedent’s and the witnesses’ signatures indicated with “s/[names].” The will left everything to the beneficiary indicated by the testimony. No potential heir contested the validity of the conformed copy. Nonetheless, the Surrogate denied probate and the Appellate Division affirmed.

New York SPCA § 1407 and Third Department case law provide that “A lost or destroyed will may be admitted to probate only if [1] It is established that the will has not been revoked, and [2] Execution of the will is proved in the manner required for the probate of an existing will, and [3] All of the provisions of the will are clearly and distinctly proved by each of at least two credible witnesses or by a copy or draft of the will proved to be true and complete.” The Surrogate found that petitioner had established the first two elements, but had fallen short on the third. The Appellate Division agreed that “petitioner failed to show that the conformed copy of decedent’s will was ‘true and complete,’” stating that “[a]lthough petitioner tendered a conformed copy of decedent’s will, there was no other proof from the hearing confirming that the conformed copy was identical to decedent’s original will.”

Takeaway: Slezak reinforces the importance of being sure that the original version of a will is available. While there appears to have been no contest to the validity of the conformed copy of the will, the courts followed the statute strictly and denied probate when one of the statutory elements for admitting the conformed copy was lacking.

Beneficiary Has a Right to an Accounting Despite the Trustee’s Return of Funds

Kaylie v. Kaylie, 2023 WL 6395345 (1st Dep’t October 3, 2023)

Can the beneficiary of a trust require a trustee to provide an accounting despite the trustee’s return to the trust of the funds said to have been diverted? In Kaylie v. Kaylie, 2023 WL 6395345 (1st Dep’t October 3, 2023), New York’s Appellate Division, First Department, answered that question in the affirmative, reversing the trial court’s determination that no accounting was necessary under the circumstances.

In Kaylie, a beneficiary of a family trust commenced an Article 77 proceeding in Supreme Court upon learning that trust bank accounts unexpectedly had zero balances. In response, the trustee argued, among other things, that the trust “irrefutably has been made whole by the restoration of those funds, thus obviating any purported need on the part of [the beneficiary] for an accounting of those funds.” The trustee also argued that she had been removed as trustee since the dispute arose, limiting her access to the bank records of the trust. The trial court agreed, holding that since the beneficiary had not “show[n] misappropriation of funds” and the trustee no longer held that position, “the intrusion of an [accounting] is not warranted….”

The Appellate Division disagreed and reversed, in a decision reaffirming the principle that a beneficiary “is entitled to a judicial accounting by reason of the fiduciary relationship between” the beneficiary and the trustee. The court stated: “The fact that respondent has returned the trust’s funds with interest does not affect petitioner’s right to an accounting.”

Takeaway: The Kaylie decision confirms the primacy of a beneficiary’s right to an accounting from the trustee of a trust, even where the trustee has a “no harm, no foul” argument based on the return of funds to a trust and the trustee’s departure as trustee.

2023 Goulston & Storrs PC.

By Charles R. Jacob III , Jennifer L. Mikels , Molly Quinn , Gary M. Ronan , Nora A. Saunders of Goulston & Storrs

For more news on Probate & Fiduciary Updates, visit the NLR Estates & Trusts section.

Taxpayer Makes Offer, But IRS Refused

James E. Caan, the movie actor most famous for playing Sonny Corleone in The Godfather, got into IRS trouble regarding the attempted tax-free rollover of his IRA.

Caan had two IRA accounts at UBS, a multinational investment bank and financial services company. One account held cash, mutual funds and exchange-traded funds (ETF) and the other account held a partnership interest in a hedge fund called P&A Multi-Sector Fund, L.P.

Because the hedge fund was a non-publicly traded investment, UBS required Caan to provide UBS with the year-end fair market value to prepare IRS Form 5498. Caan never provided the fair market value as of December 31, 2014. UBS issued a number of notices and warnings to Caan and finally on November 25, 2015, UBS resigned as custodian of the P&A Interest. UBS issued Caan a 2015 Form 1099-R reporting a distribution of $1,910,903, which was the value of the P&A Interest, used as of December 31, 2013. Caan’s 2015 tax return reported the distribution as nontaxable.

In June 2015, Caan’s investment advisor Michael Margiotta resigned from UBS and began working for Merrill Lynch. In October 2015, Margiotta got all UBS IRA assets to transfer to a Merrill Lynch IRA, except for the P&A Interest. The P&A Interest was ineligible to transfer through the Automated Customer Account Transfer Service. In December 2016, Mr. Margiotta directed the P&A Fund to liquidate the P&A Interest and the cash was transferred to Caan’s Merrill Lynch IRA in three separate wires between January 23 and June 21, 2017.

In April 2018, the IRS issued a Notice of Deficiency for the 2015 tax year asserting that distribution of the P&A Interest was taxable. On July 27, 2018, Caan requested a private letter ruling asking the IRS to waive the requirement that a rollover of an IRA distribution be made within 60 days. In September 2018, the IRS declined to issue the ruling.

Caan died July 6, 2022. In the Estate of Caan v. Commissioner, 161 T.C. No. 6 (October 18, 2023), the Tax Court ruled that Caan was not eligible for a tax-free IRA rollover of the P&A Interest for three reasons. First, to be a nontaxable rollover the taxpayer may not change the character of any noncash distributed property, but here, the P&A Interest was changed to cash before being rolled-over. Second, the contribution of the cash occurred long after the 60-day deadline. Third, only one rollover contribution is allowed in any one-year period, but Caan had three contributions. The Court also determined the 2015 fair market value of the P&A Interest.

Finally, the Tax Court determined that it has jurisdiction to review the IRS denial of the 60-day waiver request and that the applicable standard of review is an abuse of discretion. The Court ruled there was no abuse of discretion because Caan changed the character of the rollover property and even if the IRS waived the 60-day requirement, the rollover would still not be tax-free.

The case highlights some of the potential dangers in holding non-traditional, non-publicly traded assets in an IRA.

© 2023 Chuhak & Tecson P.C.
For more news on IRA rollovers, visit the NLR Tax section.

DHS Publishes List of Countries Eligible for H-2A, H-2B Visa Programs

The Department of Homeland Security has published lists of countries whose nationals will be eligible for the H-2A and H-2B visa programs in the upcoming year.

‌Key Points:

  • The lists are mostly unchanged from last year, with one addition, Bolivia, to both lists.
  • All nationals who were eligible for the H-2A and H-2B visa programs last year will remain eligible this year.
  • Nationals of Mongolia and the Philippines will remain eligible for the H-2B visa program but not the H-2A program. Nationals of Paraguay will remain eligible for the H-2A program but not the H-2B program.
  • Nationals of countries that are not on the lists may be eligible for H-2A or H-2B visas on a case-by-case basis if U.S. Citizenship and Immigration Services makes a determination that issuing a visa would be in the national interest.

Additional Information: The countries whose nationals are eligible for the H-2A and H-2B visa programs are as follows.

Andorra The Kingdom of Eswatini Madagascar Saint Lucia
Argentina Fiji Malta San Marino
Australia Finland Mauritius Serbia
Austria France Mexico Singapore
Barbados Germany Monaco Slovakia
Belgium Greece Mongolia* Slovenia
Bolivia Grenada Montenegro Solomon Islands
Bosnia and Herzegovina Guatemala Mozambique South Africa
Brazil Haiti Nauru South Korea
Brunei Honduras The Netherlands Spain
Bulgaria Hungary New Zealand St. Vincent and the Grenadines
Canada Iceland Nicaragua Sweden
Chile Ireland North Macedonia Switzerland
Colombia Israel Norway Taiwan***
Costa Rica Italy Panama Thailand
Croatia Jamaica Papua New Guinea Timor-Leste
Republic of Cyprus Japan Paraguay** Turkey
Czech Republic Kiribati Peru Tuvalu
Denmark Latvia The Philippines* Ukraine
Dominican Republic Liechtenstein Poland United Kingdom
Ecuador Lithuania Portugal Uruguay
El Salvador Luxembourg Romania Vanuatu
Estonia

*Mongolia and the Philippines are eligible to participate in the H-2B program but are not eligible to participate in the H-2A program.

**Paraguay is eligible to participate in the H-2A program but is not eligible to participate in the H-2B program.

©2023 Berry Appleman & Leiden. All Rights Reserved.
For more news on Visa Program Eligibility, visit the NLR Immigration section.

New FEHA Regulations Alter How, When Employers Can Consider Applicant’s Criminal Histories

The California Civil Rights Council (CRD) (formerly the DFEH) has issued new regulations that modify the Fair Employment and Housing Act (FEHA), the law that governs how and when California employers can consider a job applicant’s criminal history when making employment decisions. The new regulations took effect on October 1, 2023, and provide more coverage, prohibitions and requirements for potential employers to consider.

IN DEPTH

THE LAW

Under the FEHA, employers are prohibited from inquiring into a job applicant’s criminal history prior to extending a conditional offer of employment, including through job applications, background checks and internet searches.

The FEHA also requires that if an employer is considering taking an adverse action with respect to a job applicant or employee, the employer must first conduct an individualized assessment of the job applicant’s criminal history—including determining whether the applicant’s criminal history has a “direct and adverse” effect on their ability to perform the functions of the position.

While the thrust of the law remains the same, the new regulations expand the scope of who is covered by the FEHA, the kinds of inquiries the law prohibits, the kinds of evidence employers must accept and consider regarding an applicant’s justification for the past offense in question and the process for recission of a conditional offer of employment.

EXPANDED COVERAGE

First, the new FEHA regulations expand the definitions of “employer” and “applicant.” Previously, an “employer” was defined as “a labor contractor or client employer.” The updated regulations clarify that the definition of employer additionally encompasses any direct or joint employers, agents of the employer, staffing agencies, entities that evaluate the applicant’s criminal history on behalf of an employer, and entities that select or provide workers to an employer from a pool or availability list.

Similarly, the updated regulations clarify that an “applicant” may include, in addition to an individual who has been conditionally offered employment, existing employees who have applied to a different position with their current employer, those who have indicated a specific desire to be considered for a different position with their current employer, and even an existing employee who is subjected to a review and consideration of their criminal history because of a change in ownership, management, policy or practice.

Employers should note that job applicants are still considered “individuals who have been conditionally offered employment” even if they have commenced employment during the post-conditional offer review and criminal background check process. In other words, employers cannot transition an applicant to an employee before beginning the background check process to avoid the FEHA.

EXPANDED PROHIBITIONS

The new regulations make clear that employers are prohibited from including statements in job advertisements, postings, applications or other materials indicating that they will not consider applicants with criminal histories, including statements such as “no felons” or “must have clean record.”

In addition, employers are prohibited from conducting pre-hire internet searches on job applicants, and they cannot consider criminal history even if voluntarily provided by the job applicant during the application or interview process.

Moreover, employers are now barred, at any stage of the hiring process, from the following:

  • Refusing additional evidence voluntarily provided by an applicant contextualizing the offense in question (or another party at the applicant’s request);
  • Requiring an applicant to submit additional evidence, or a specific type of documentary evidence, regarding the offense in question; and
  • Requiring an applicant to disclose their status as a survivor of domestic abuse or comparable statuses, medical records, or the existence of a disability or diagnosis.

EXPANDED ADVERSE EMPLOYMENT ACTION REQUIREMENTS

Currently, employers are required to conduct an individualized assessment of an applicant’s criminal offense and its bearing on the individual’s candidacy before rescinding a conditional offer of employment if the decision is based in whole or in part on the applicant’s criminal history. However, the updated regulations explain that employers must additionally conduct a reassessment after the job applicant has had an opportunity to respond to the pre-adverse action notice and before making a final decision. The result is a four-step process: (1) the initial individualized assessment, (2) the pre-adverse action notice and applicant response, (3) reassessment and (4) the final decision. We discuss each step below.

1 – INITIAL INDIVIDUALIZED ASSESSMENT

The new regulations expand the scope of the employer’s individualized assessment. The regulations require the assessment to be reasoned and evidence-based, take place prior to sending the pre-adverse action letter and consider the following factors:

  • The nature and gravity of the offense or conduct;
  • The time that has passed since the offense or conduct;
  • The nature of the job held or sought; and
  • Evidence of rehabilitation or mitigating circumstances.

2 – THE PRE-ADVERSE ACTION NOTICE AND APPLICANT RESPONSE

If an employer wishes to rescind a conditional offer of employment after conducting an individualized assessment, the employer must notify the applicant in writing. The notice requirements largely remain the same: Employers must identify the conviction(s) they based their decision on, provide a copy of all the reports they utilized (including internet search results), inform the applicant that they have a right to respond before the decision is finalized and explain the kinds of evidence the applicant may provide evidence as part of their response. However, the new regulations do make a few notable changes to the notice requirement:

  • The regulations require the employer to provide the job applicant with notice of their right to respond to a pre-adverse action notice and with a response deadline that is at least five (5) business days from the date the applicant receives the notice.
  • If an applicant timely notifies the employer in writing that additional time is needed to respond, the employer must give the applicant at least five additional business days to respond to the notice before making a final decision. The regulations contain ambiguity regarding what is a “timely” notification.
  • If the pre-adverse action notice is sent to the applicant through email, the notice is deemed received two business days after it is sent, meaning that the five-day response deadline begins to run after the second day post-transmittal.

3 – REASSESSMENT

If the applicant provides evidence related to mitigating circumstances or their rehabilitative efforts since the conviction at issue, the employer must consider the information—a process the new regulations call “reassessment.” The employer must consider factors such as the applicant’s conduct during incarceration, employment history since the conviction or release from incarceration, community service and engagement, and other rehabilitative efforts.

4 – FINAL DECISION

There are no new requirements for employers to consider when making their final decision to rescind a conditional offer of employment.

EMPLOYER LIABILITY IMPOSED BY FEHA

Job applicants may allege violations of the FEHA by arguing that there is a less discriminatory policy or practice that serves the employer’s goals as effectively as its current background check policy or practice without significantly increasing the cost or burden on the employer. These allegations can be lodged through a complaint filed with the CRD or a civil lawsuit for discrimination. A variety of remedies are available for possible violations of the FEHA, such as reinstatement of back pay and benefits, compensatory damages for emotional distress and out-of-pocket losses, injunctive relief and punitive damages. Courts also regularly award attorneys’ fees if job applicants prevail.

PRACTICAL CONSIDERATIONS AND NEXT STEPS

Employers with background check programs can start implementing the following key action items in response to the updated FEHA regulations:

  • Review and update job postings and applications to ensure that they do not include statements suggesting that job applicants are barred from the process because of their criminal history, including “no convicted felons,” “criminal background check required” and language referring to “ex-offenders.”
  • Review background check policies as necessary to ensure compliance with the FEHA’s new requirements, including expanded time periods in communications with job applicants consistent with the four-step process above if considering an adverse action.
  • Ensure detailed and organized documentation of all discussions with job applicants who may be subject to an adverse action in preparation for future challenges to the employer’s hiring process under the new regulations.
  • Consider providing additional or updated trainings to human resources professionals who handle the application and new-hire process, especially to emphasize that internet searches (including social media) of job applicants are strictly prohibited prior to extending a conditional offer of employment. All inquiries should be saved until after a conditional offer of employment has been extended.
© 2023 McDermott Will & Emery
By Marjorie C. Soto Garcia of McDermott Will & Emery 
For more news on Employer Considerations of Criminal History, visit the NLR Labor & Employment section.