Category: Administrative & Regulatory

The NLRB Revives Controversial Expedited Election Rules – National Labor Relations Board

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On February 6, 2014, the National Labor Relations Board (NLRB) reissued its controversial rules aimed at expediting union elections in the workplace. This rule, referred to as the “Ambush Election Rule,” could limit an employer’s right to express its views to employees and respond to union statements. The proposed rules mirror the NLRB’s June 2011 proposal, which ultimately was struck down by a district court in May 2012.

Analogous to the June 2011 proposal, the NLRB’s most recent proposal seeks to significantly impact the current union election process. The proposed reforms are aimed at shortening the election cycle from the current median of 38 days from petition to election to as little as 10 to 21 days. The proposed reforms also would move resolution of voter eligibility determination to after the election; reduce the NLRB’s review of representation cases; expand employer disclosure of employee contact information (including e-mail addresses); and allow more electronic filing with the NLRB.

Despite reducing the amount of time an employer has to communicate its message or rebut the union’s statements, NLRB Chairman Mark Gaston Pearce has stated the proposed rules are intended to “improve the process for all parties.” The NLRB is likely to issue a final rule governing union elections later this year.

Action Steps?

The NLRB has issued a proposed rule, and by law, will allow for public comments through April 7, 2014. Employers may direct comments regarding the proposed reforms to the NLRB here. Additionally, the NLRB will hold a public hearing on the proposed rules in Washington D.C. during the week of April 7, 2014, and employers may voice their concerns at the forum.

Finally, employers should consider conducting a vulnerability audit to identify any concerns that can be addressed now (rather than after a final rule is put in place) and should provide supervisors and management with training so they are prepared to address any potential NLRB election situation.

Article by:

Of:

Michael Best & Friedrich LLP

Philadelphia Enacts Pregnancy Accommodation Law

Morgan Lewis

 

An amendment to the city’s ordinance enhances protections for nondisabled employees affected by pregnancy or childbirth and imposes greater accommodation requirements on employers.

On January 20, Philadelphia Mayor Michael Nutter signed an amendment[1] to the city’s Fair Practices Ordinance (Chapter 9-1100 of The Philadelphia Code), expressly banning discrimination based upon pregnancy, childbirth, or a related medical condition and imposing new workplace accommodation requirements on Philadelphia employers. The amendment places Philadelphia among a growing number of jurisdictions that require employers to provide workplace accommodations to employees who are “affected by pregnancy,” regardless of whether those employees are “disabled.”

Impact of the Amendment

Unlike its federal and state counterparts—the Pregnancy Discrimination Act, the Americans with Disabilities Act, and the Pennsylvania Human Relations Act—Philadelphia’s amended ordinance actually compels employers to make reasonable workplace accommodations for female employees “affected by pregnancy”—i.e., women who are pregnant or have medical conditions relating to pregnancy or childbirth—regardless of whether those employees have been “disabled” by the pregnancy. The ordinance identifies a number of possible accommodations that may be required, including restroom breaks, periodic rest for those whose jobs require that they stand for long periods of time, special assistance with manual labor, leave for a period of disability arising from childbirth, reassignment to a vacant position, and job restructuring.

This new law imposes a significant burden on employers, requiring that they grant the requested accommodations unless doing so would impose undue hardship on the operation of the employers’ businesses. The factors to be considered in the undue hardship analysis include the following: (a) the nature and cost of the accommodations; (b) the overall financial resources of the employer’s facility or facilities involved in the provision of the reasonable accommodations, including the number of persons employed at such facility or facilities, the effect on expenses and resources, or the impact otherwise of such accommodations upon the operation of the employer; (c) the overall financial resources of the employer, including the size of the employer with respect to the number of its employees and the number, type, and location of its facilities; and (d) the type of operation or operations of the employer, including the composition, structure, and functions of the workforce, and the geographic separateness or administrative or fiscal relationship of the facility or facilities in question to the employer.

Perhaps the most significant aspect of the amendment is that it extends privileges to employees affected by pregnancy that are unavailable to other employees, including many disabled employees. For example, the law requires an employer to consider job reassignment and job restructuring for pregnant employees, even though these types of accommodations are generally not required for disabled employees under state or federal law. As such, employers with operations in Philadelphia (along with those in other jurisdictions that have recently passed heightened pregnancy accommodation laws like California,[2]Maryland,[3] New Jersey,[4] and New York City[5]) should revisit their existing reasonable accommodation policies to ensure that they are providing required accommodations for pregnant workers—even those who are healthy and not incapacitated by the pregnancy.

From a litigation perspective, the law specifies the affirmative defenses that will be available to employers facing claims under the amended ordinance. In addition to the undue-burden defense described above, an employer will have an affirmative defense if it can show that the employee “could not, with reasonable accommodations, satisfy the requisites of the job.” This language is important because it will allow employers to continue managing the performance of pregnant workers who, even with accommodation, simply cannot perform their jobs. Nonetheless, the impact of this affirmative defense remains to be seen given the amendment’s language suggesting that job restructuring and reassignment may be required accommodations.

Employees aggrieved by a violation of the amended ordinance are entitled to the same remedies that are available for other unlawful employment practices—including injunctive or other equitable relief, compensatory damages, punitive damages, and reasonable attorney fees. Additionally, certain factual scenarios, such as a failure to properly respond to a request for accommodations (e.g., lactation breaks or nursing an infant), may trigger a pregnancy accommodation cause of action, as well as causes of action under the Fair Labor Standards Act and/or Title VII.[6]

As mentioned above, the amendment places Philadelphia squarely in the middle of a significant legislative trend that has been gaining momentum. In the last 18 months, California, Maryland, New Jersey, and New York City have passed similar pregnancy accommodation laws. Several other jurisdictions are, or will soon be, considering comparable legislation. The West Virginia House of Representatives unanimously passed a similar bill on February 5, 2014, and Pennsylvania legislators announced in December 2013 that they will be introducing Pennsylvania’s Pregnant Workers Fairness Act in the near future. In addition, a federal version of the Pregnant Workers Fairness Act was introduced in the U.S. Senate in May 2013 but stalled in committee. Several other states—including Alaska, Connecticut, Hawaii, Illinois, Louisiana, Michigan, New Hampshire, and Texas—already require some type of pregnancy accommodation.

Notice Requirement

The new law requires that Philadelphia employers provide written notice—in a form and manner to be determined by the Philadelphia Commission on Human Relations—by April 20, 2014. The notice must be posted conspicuously in an area accessible to employees.

Moving Forward

For employers with operations in Philadelphia, the amendments to the Fair Practices Ordinance may signal that now is the time to revisit or revamp employee handbooks and train human resources and benefits employees on the new requirements in this area. Specifically, the amended ordinance will require most Philadelphia employers to overhaul their reasonable accommodation policies and train human resources professionals and managers regarding when the interactive process is triggered for employees affected by pregnancy, what steps must be followed to ensure effective engagement in that process, and when accommodations must be granted for such employees.

[1]. View the amendment here.

[2]. See our December 28, 2012 LawFlash, “New California Disability Regulations to Become Effective December 30,” available here.

[3]. See our July 1, 2013 LawFlash, “Maryland Enacts Three New Employment Laws,” available here.

[4]. See our January 10, 2014 LawFlash, “New Jersey Assembly Passes Pregnancy Discrimination Bill,” available here, and our January 27, 2014 LawFlash, “New Requirements for New Jersey Employers,” available here.

[5]. See our September 27, 2013 LawFlash, “New York City Offers Greater Protections for Pregnant Workers,” available here.

[6]. See our June 12, 2013 LawFlash, “New Developments Surrounding Lactation Discrimination,” available here.

Article by:

Sean P. Lynch

Of:

Morgan, Lewis & Bockius LLP

Caveat Emptor: Due Diligence of the United Kingdom Continental Shelf Oil and Gas Assets

Andrews Kurth

 

This article explores the due diligence of United Kingdom continental shelf (“UKCS”) oil and gas assets from a buyer’s perspective. Good management, organisation, communication, clarity and common sense are the key to a successful due diligence exercise. The scope of the due diligence review will depend on a number of factors, including whether the buyer has any knowledge of or a current participating interest in the target asset, whether the asset is in the exploration or production phase or is an operated asset, the size of the deal and any cost and time restraints. Whether a buyer requires a red flag due diligence report or a comprehensive report on the asset, care must be taken to ensure that no stone is left unturned during the course of the review. Failure to do so may result in undesirable consequences.

Preparation

Before embarking on an extensive review of the documentation provided by the seller, the buyer should seek to determine the scope of the due diligence exercise at the outset to prevent it from becoming a moving target which may lead to inefficiencies and unexpected cost implications. Sometimes the prospective buyer will investigate the asset with a view to purchase. More often than not, due diligence of the asset will amount to no more than a tyre-kicking exercise. The intention of the prospective buyer will therefore ultimately colour the scope of the due diligence undertaken.

As well as considering the information memorandum prepared by the seller (if any), it is also useful for the buyer to geographically place the asset by consulting a map of theUKCS licence interests and blocks. Such preparations will enable the buyer to better piece together the documentation provided in respect of the target asset and request any missing information from the seller.

Data Room

Whether the seller furnishes the buyer with a virtual or a physical data room, the buyer must keep an accurate record of the documents that have been disclosed. If a virtual data room is employed, the buyer must ensure that it is notified when new documents have been provided and, if documents are supplied in soft or hard copy outside of the virtual data room arrangement, details should be kept of these by the buyer as well. This is all essential because all disclosure will later form part of the sale and purchase arrangements between the buyer and seller.

Data rooms for asset disposals typically include legal, financial, technical, commercial and operational documents. One of the first tasks that a buyer should undertake is to review the data room index, if one has been provided, and allocate documents to the various specialists for review; careful coordination is paramount to ensure that all bases are covered. If no index has been supplied, one should be requested from the seller and, if such index is not forthcoming, it is recommended that the buyer compiles an index so that it can keep a running record.

Depending on the scale of the exercise and number of people employed to assist, the coordinator of the due diligence exercise should ensure that team members effectively communicate with each other. Typically, virtual data rooms limit access rights to a small pool of permitted entrants, so responsibilities should be allocated between professionals at an early stage. Data rooms are often poorly organised so it is important that the coordinator is made aware of documents which have been filed out of place in order for them to be allocated to the correct team members for review. This way, no document will be overlooked.

Title Verification

A UKCS asset is typically represented by a licence, a joint study and bidding agreement (“JSBA”) or joint operating agreement (“JOA”) and, in some cases, a working interest assignment. Assets may also be subject to a unitisation and unit operating agreement (“UUOA”), transportation, processing and petroleum sales agreements and other material project contracts.

One of the key objectives of the buyer’s due diligence is to determine whether the seller actually holds an interest in the asset. Often an asset will be described inconsistently in the documentation by which it is governed and may not correspond accurately with the information held by the Department of Energy and Climate Change (“DECC”). This is especially true of those assets historically operated under a JOA which has been subsequently sub-divided to apply to multiple blocks within a licence, or those assets with an alias which has stuck over the passage of time. It is therefore very important that both parties are agreed on the correct identity of the asset being bought and sold from the outset.

Similarly, infrastructure assets are frequently referred to under a variety of guises and are often complex in nature. For instance, the Sullom Voe Terminal, which is one of the largest oil terminals in Europe, handles production from more than twelve oil fields in the east Shetland Basin and approximately twenty different companies presently hold interests in the terminal. This, combined with the fact that it has been 35 years since first oil arrived at the Sullom Voe Terminal, means that tracing title to this infrastructure asset is likely to be a knotty and time-consuming exercise.

Although DECC holds data on all offshore licences, this should by no means act as a substitute for mechanically tracing title to an asset, however tempting this may be. Many UKCS assets date back over 40 years and so tracing title back to their inception can be a lengthy process. The buyer must therefore decide whether it wants to undertake or commission such work, or whether it can take comfort from tracing title back through only a limited number of transfers and seek a full title guarantee from the seller. Extensive title representations and warranties may reduce the scope of title due diligence but often they will be qualified by the information, or lack thereof, disclosed to the buyer in the data room and so are not a reliable remedy if there is a title defect.

There may be some merit in tracing title of each material contract back to the date on which it became effective in order to determine whether or not it is relevant to the transaction. Sometimes contracts in the data room will have been entered into by parties which are neither the seller nor its predecessors in title and, in other cases, may not be relevant to the target asset at all. In these circumstances, and depending on the purchaser’s view of the asset, it may be more efficient to determine which contracts are required to be assigned or novated at the due diligence stage rather than when the parties are seeking to complete the deal.

An additional complication is that a company which was originally the holder of an interest in an asset may have changed its name since it was first registered at Companies House. The buyer should therefore consult the change of name register held by Companies House at the start of the due diligence exercise and take note of any previous names. This will enable the buyer to piece together information relating to the asset more easily.

Title to assets, excluding infrastructure, is evidenced by the relevant licence, JSBA or JOA and, if applicable, UUOA. Typically, a transfer of a participating interest will be evidenced by a JSBA or JOA deed of novation, and if applicable a UUOA deed of novation, which will provide for the transfer of the relevant participating interest from the seller to the buyer. Conversely, not every transfer of a participating interest will be evidenced by a licence assignment. An example of this is where the buyer and seller are already party to the JOA and/or UUOA. If neither the buyer nor the seller is joining or leaving the licence, and the parties are simply adjusting their participating interests under the JOA and/or UUOA, a licence assignment will not be required. In the same way, where a licence governs multiple blocks and the buyer has an interest in another block covered by the licence and the seller is also remaining on the licence, either because it has an interest in another block covered by the licence or because it is only selling part of its interest to the buyer in the relevant block, when the buyer acquires the interest in the relevant block, a licence assignment will not be required.

There is often a question asked as to whether working interest assignments are required to show a complete chain of title to an asset. A working interest assignment evidences the transfer of the beneficial interest in the asset. The more prevalent view is that this type of assignment is no longer necessary to perfect title, especially where there is a JSBA, JOA or UUOA already in place. Its purpose, being a document on which stamp duty was levied, is now obsolete. Although, buyers and sellers still frequently include the working interest assignment in their suite of completion documents by means of convention, it is not obligatory to enter into this assignment to complete an asset transfer. Due to the disproportionate amount of time and energy that buyers and sellers may spend in hunting for non-existent working interest assignments to evidence a complete chain of title, the better view may be to exclude the working interest assignment from the scope of the title due diligence exercise.

Assignment

Pre-emption rights and consent provisions are principal deal-structure considerations and should therefore be given top priority when conducting the due diligence exercise. Their consequences may prevent the proposed deal from going ahead, increase the cost of the transaction if co-venturers are permitted to withhold their consent on the grounds of financial incapability unless some form of financial security is provided by the buyer and/or cause the deal to be restructured as a share sale. It will therefore be important to review the assignment provisions of all the material contracts, and particularly any JSBAs, JOAs and UUOAs, to identify such obstacles at the earliest possible stage.

If an asset is governed by both a JOA and UUOA, care needs to be taken in order to determine whether the pre-emption and/or consent provisions in one or both agreements apply. Often the UUOA will expressly state that the provisions in the UUOA supersede the provisions in the JOA to the extent that they conflict. In this case, the assignment provisions in the UUOA will override the assignment provisions in the JOA in respect of the area covered by the JOA which forms part of the unit area. Any remaining area that is solely governed by the JOA will be subject to the JOA pre-emption and consent provisions. If it is not clear from the documentation whether the provisions in the UUOA or JOA will prevail, the better approach for a buyer to take may be to err on the side of caution; in other words, to apply the more onerous pre-emption and/or consent provisions to the whole of the asset transfer or consider restructuring the transaction as a share sale.

Material Contracts

The scope of the due diligence review of material contracts is likely to be determined by the materiality threshold proposed by the buyer with respect to contract value. The buyer should review all material contracts in order to ascertain whether the seller has the necessary rights under such contracts and identify potential liabilities, risks and onerous provisions that affect the valuation of the asset or, worse still, could prevent the deal.

It is important that the correct selling entity holds an interest in the relevant material contract and any inconsistencies should be highlighted to the buyer so that the seller can arrange for any necessary inter-group transfers in good time if required. The buyer should also be vigilant to any poison pills that kill the contracts in the event of a change of party or change of control.

If time, cost and scope permit, it can be invaluable to prepare full and accurate contract summaries of all material contracts. The simplest and most efficient way of doing this is to table contract summary templates for the various categories of contract. For instance, there could be separate templates for licences; JSBAs, JOAs and UUOAs; petroleum sales agreements; transportation and processing arrangements; and sundry agreements, if applicable. Templates are useful aides to those reviewing the asset documentation. Firstly, they ensure that all members of the team focus and report on every provision of the contract within the scope of the due diligence exercise. Secondly, and especially for large scale due diligence reviews, they are important for the purposes of consistency and efficiency. The buyer’s due diligence report should be informative, concise, on point and appear to have been written by one person. Full, tailored contract summaries help to achieve this purpose.

Contract summaries also serve a bigger purpose. If after the due diligence exercise the buyer decides to enter into a sale and purchase agreement with the seller and proceed to completion, the closing documents will include deeds of assignment and novation for the various material contracts. Complete contract summaries make the task of deducing which material contracts will need to be assigned or novated easier. They also make for a more efficient process as they prevent the buyer from having to re-locate each document in the data room and re-review their provisions.

If the asset is producing or has an approved field development plan, the buyer should expect to see material contracts in the data room relating to petroleum sales agreements and lifting, transportation and processing arrangements. Particularly in respect of some of the older UKCS assets, it is not always clear whether a document is historical or not. Typically, the buyer will exclude historical construction, tie-in commissioning and joint development agreements from its due diligence scope and place less emphasis on reviewing pipeline crossing and proximity agreements, unless it has a particular interest in the provisions of such documents.

It is likely that the data room will include some material contracts which are governed by the laws of another country or state. Depending on the importance of such contracts, the buyer should consider whether to seek advice from local counsel. In addition, in the course of due diligence for an asset acquisition, it is likely that there will be property and tax related documentation and these should be reviewed by specialists in those fields. It may also be necessary to examine the proposed transaction from a competition perspective and so the need for competition lawyers should be considered at an early stage.

During the due diligence exercise, the buyer should be aware of any information which evidences that the seller has been acting in breach of contract or is in breach of its licence obligations. Any current or anticipated claims from third parties or on-going litigation will be of particular interest to the buyer and should be noted. The buyer should also be alerted to whether any contractual provisions will be breached by the acquisition of the target asset if they are ignored by the buyer. For instance, often under seismic data contracts data must be returned or a supplemental fee paid if the identity of the purchasing company alters.

On completion of a transaction, the buyer will want all material contracts to be novated to it from the seller, unless the transaction is structured as a share sale. In some circumstances this may not be possible if third-party consents remain outstanding and so the seller and buyer should use their reasonable endeavours to obtain such consents post completion. Typically, this approach is only taken in respect of those contracts of limited value or importance. The seller will agree to hold such contracts as trustee and agent of the buyer and the buyer will agree to perform such contracts on the seller’s behalf and indemnify the seller against any costs or liabilities it incurs in respect of such arrangement. This split completion approach is not always possible in respect of those agreements which are contractually linked to others or to the transfer of the participating interest. The buyer should therefore bear in mind any linkage provisions that it uncovers in its due diligence exercise.

Decommissioning

The buyer will be keen to discover whether a field-wide decommissioning security agreement is in place for the target asset or whether the JSBA, JOA and/or UUOA include decommissioning security provisions. Where decommissioning security provisions exist, the buyer should consider the type and amount of security required, the credit rating of such security, whether the asset is in the run-down period and/or how the trigger date is calculated. Depending on the terms of the transaction and whether a section 29 notice has been served on the seller before the asset is transferred to the buyer, the buyer may need to provide security for decommissioning under the sale and purchase agreement to the seller as well. Decommissioning arrangements will be a fundamental consideration to the buyer’s valuation of the asset and will therefore always require financial and/or actuarial input.

Encumbrances

The buyer should conduct a charges search at Companies House in order to determine whether the seller should arrange for any outstanding encumbrances over the asset to be released as part of the transaction. The buyer should also be concerned with any third-party royalties over the seller’s interest in the asset. Any royalty payments on production in respect of all petroleum won and saved will have an impact on the financial value of the target asset and so the buyer should factor the existence of these into its valuation.

Likewise, details of any outstanding cash calls, sole risk activity or carried interests may also be important considerations for the buyer and their existence may result in an adjustment of the price the buyer is prepared to pay for the asset.

Questions and Answers

The question and answer process is central to the due diligence exercise and is an important string to the buyer’s bow. By asking the seller questions, the buyer can better understand the seller’s asset from the responses provided and seek to address any holes or limitations in the data room documents. A classic example of the curious incident of the dog that didn’t bark in the night is the unknown existence of an area of mutual interest agreement which, in the most draconian of circumstances, may prevent a buyer from completing its transaction with the seller, or may prevent the buyer from applying for and/or acquiring an interest in another particular licence area post completion of its transaction with the seller.

If draft contracts have been included in the data room the buyer should ask the seller to confirm whether final versions have been executed and, where documents which have been provided during the due diligence exercise refer to others which have not, the buyer should request these missing documents from the seller. The buyer should maintain an accurate list of questions that have been submitted to the seller and the responses received. Sometimes questions will be answered unsatisfactorily and it is therefore important for the buyer to re-phrase or pursue answers to the originals.

The buyer may also choose to contact DECC with questions on an unnamed basis during the due diligence exercise if there appears to be an inconsistency between the asset data held by DECC and the documentation provided by the seller in the data room. In doing so, the buyer must be careful not to breach any provisions contained in any confidentiality or non-disclosure agreement that has been entered into between the buyer and seller in respect of the transaction.

Conclusion

The buyer conducts due diligence so that it can properly evaluate the risks and benefits to it in acquiring a particular asset, re-negotiate the price that it is prepared to pay for the asset, and decide whether or not to go ahead with the purchase. The due diligence report should identify and quantify issues found and propose solutions for the buyer to consider. Depending on the concerns identified, traditional contractual protections in the sale and purchase agreement may be insufficient and, consequently, the buyer may decide to walk away from the deal. The importance of the due diligence exercise is therefore paramount.

Article by:

Rebecca Downes

Of:

Andrews Kurth LLP

Supreme Court Limits Stipulations to Circumvent CAFA (Class Action Fairness Act)

ArmstrongTeasdale logo

 

The U.S. Supreme Court decided in State Fire Insurance Co. v. Knowles that a class representative plaintiff cannot use a precertification stipulation to evade the federal jurisdictional amount of CAFA. 28 U.S.C. 1332 (d)(2) &(6). In Knowles, plaintiff sued State Fire Insurance Co. but stipulated precertification that damages would not exceed $5 million dollars, the threshold limit to invoke CAFA jurisdiction. State Fire removed the case from Arkansas state court but the Federal District Court remanded it to the state court concluding that the amount in controversy fell below the CAFA threshold in light of plaintiff’s stipulation. The Supreme Court found that the stipulation could tie plaintiff’s hands because stipulations are binding on the party that makes them. However, such a stipulation would not be binding at this stage of the litigation because a plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified. The Court therefore, vacated and remanded the case for further proceedings.

A good practice pointer learned from this case is that defendant’s should be mindful of the advantages of the CAFA and invoke federal court jurisdiction where possible. Also, a pretrial stipulation by the class representative does not prevent using CAFA if the other jurisdictional requirements for CAFA are met.

Article by:

Casey O. Housley

Of:

Armstrong Teasdale

The Affordable Care Act—Countdown to Compliance for Employers, Week 47: The Reporting Conundrum

MintzLogo2010_Black

 

The Affordable Care Act establishes three new, high-level, reporting requirements:

  • Code § 6051(a)(14)

Employers must report the cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2, Wage and Tax Statement;

  • Code § 6055

Entities that offer minimum essential coverage (i.e., health insurance issuers, certain sponsors of self-insured plans, government agencies and other parties that provide health coverage) must report certain information about the coverage to the employee and the IRS; and

  • Code § 6056

Applicable large employers must provide detailed information relating to health insurance coverage that they offer.

The W-2 reporting rules have been in effect for a while, and I do not address them in this post. This post instead addresses Code §§ 6055 and 6056, which were originally slated to take effect in 2014, but which were subsequently delayed by one year in IRS Notice 2013-45.

The Treasury Department and IRS issued proposed regulations under both rules on September 30, 2012. (For an explanation of the proposed regulations, please see our October 21, 2013 client advisory. Although garnering far less attention than the Act’s pay-or-play rules, the rules under newly added Code §§ 6055 and 6056 should not be overlooked. Both provisions require a good deal of specific information about covered persons and the particular features of the group health plan coverage such persons are offered. Required reports must be furnished to both the government and covered individuals.

  • Under Code section 6055, plan sponsors must report to the IRS who is covered by the plans and the months in which they were covered. Plan sponsors must also provide this information to the employees who are enrolled in their plans along with additional contact information for the plan.
  • Under Code section 6056, applicable large employers must report to the IRS, and provide to affected full-time employees, information that includes:

(i) The employer’s contact information;

(ii) Whether the company offered minimum essential coverage to full-time employees and their dependents;

(iii) The months during which coverage was available;

(iv) The monthly cost to employees for the lowest self-only minimum essential coverage;

(v) The number of full-time employees during each month; and

(vi) Information about each full-time employee and the months they were covered under the plan.

Absent regulatory simplification, the costs of compiling, processing, and distributing the required reports will be substantial. But the regulators are in a difficult position, since they must remain true to the requirements of the law. The proposed regulations do offer some suggestions for simplification. For example:

  • Employers might be permitted to report coverage on IRS Form W-2, rather than requiring a separate return under Section 6055 and furnishing separate employee statements. But this approach could be used only for employees employed for the entire calendar year and only if the required contribution for the lowest-cost self-only coverage remains stable for the entire year.
  • The W-2 method could also be extended to apply in situations in which the required monthly employee contribution is below a specified threshold (e.g., 9.5% of the FPL) for a single individual, i.e. the individual cannot be eligible for the premium assistance tax credit.
  • Employers might be permitted to identify the number of full-time employees, but not report whether a particular employee offered coverage is full-time, if the employer certifies that all employees to whom it did not offer coverage during the calendar year were not full-time.

Industry comments filed in response to the proposed regulations have seized these suggestions to ask for further relief. Some commenters suggested replacing the reporting process with a certification process under which an employer could simply certify that it has made the requisite offer of coverage. Others have asked that information be provided to employees only on request, on the theory that not all employees will need to demonstrate that the employer either failed to offer coverage or that the coverage was either unaffordable or did not constitute minimum value.

While many of the comments submitted in response to the proposed regulations were both thoughtful and practical, many are also difficult to square with the terms of the statute. As a result, the most likely outcome is that the final rules under Code §§ 6055 and 6056 will look a lot like the proposed rules—which look a lot like the statute.

Article by:

Alden J. Bianchi

Of:

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Show Me the Money: When Can I Expect My Tax Refund?

McBrayer NEW logo 1-10-13

 

Tax filing season got a late start this year thanks to the 2013 government shutdown; the IRS pushed back its official return acceptance date from January 21 to January 31. Now that IRS is accepting returns, when can taxpayers expect to see their refund?

The IRS claims that 9 out of 10 refunds are issued in less than 21 days. The IRS website has a tool called, “Where’s My Refund?” that can be used to check the status of a return 24 hours after the agency receives it electronically or 4 weeks after it is received by mail (i.e., paper return).

The IRS and tax professionals alike strongly encourage taxpayers to file electronically. Doing so can result in a quicker refund. In addition, how a taxpayer elects to receive a refund, via direct deposit or paper check, can affect wait times. Generally, the closer to the deadline (April 15th) that a return is filed, the longer the wait will be (as a majority of filers tend to wait until the deadline approaches).

It is important to note that a return can be filed without immediate payment. No penalty or interest will be levied until the April 15th deadline. Of course, there is always the option of filing for an extension, but generally speaking it is better to timely file your return, and it is important to remember that payments are still due by April 15th even when an extension has been timely filed.

In some cases, individuals can receive tax breaks and refundable credits even if they do not have to pay income tax for a given year. Thus, just because a tax return is not filed does not mean that an individual cannot benefit from professional assistance.

Don’t delay – April 15th will be here before you know it!

Article by:

H. Trigg Mitchell

Of:

McBrayer, McGinnis, Leslie and Kirkland, PLLC

Just the TTIP (Transatlantic Trade and Investment Partnership): A Review of the Transatlantic Partnership Agreement One Year After It Is Introduced to America

Sheppard Mullin 2012

 

Next week will mark one year since President Obama introduced the Transatlantic Trade and Investment Partnership (TTIP) to the nation in his State of the Union Address.  Although the TTIP received only a brief nod in the President’s speech, the TTIP initiative has moved forward at a stunning pace . . . well, a stunning pace for an international trade negotiation, a process that normally crawls along.  As discussed in this blog, the U.S. and European parties to this proposed partnership set an ambitious goal of finalizing an agreement by the end of 2014.  A year into the process, we take a look at the progress to date and the challenges to come.

TTIP Background

We often hear news of trade agreements and other arrangements designed to increase business between the United States and one or more partner countries.

TTIP is different. It’s bigger.

The European Union and the United States comprise the largest and wealthiest market in the world, accounting for over 54% of the world’s GDP and 40% of the world’s purchasing power.  It follows that even the slightest reduction in marketplace barriers on a scale that large could result in sizeable trade increases and economic benefits.  The European Centre for Economic Policy Research estimates that TTIP could boost U.S. exports to the EU by $300 billion annually and add $125 billion to U.S. GDP each year.

Tariffs between the trading partners are already some of the lowest in the global market.  Accordingly, TTIP focuses on reducing non-tariff-barriers (NTBs) to trade between the United States and Europe.  The proposed NTB reductions include aligning domestic standards, cutting costs imposed by bureaucracy and regulations, and liberalizing trade in services and public procurement.

TTIP Negotiations Thus Far

Over the past year, U.S. and EU representatives have met for three rounds of negotiations – the first round was primarily introductory and the other two were more substantive.  The most recent of these negotiation rounds, completed in December, left the U.S. Trade Representative sanguine.  The USTR stated on its website that, “it is a measure of progress that we are firmly in the phase of discussing proposals on core elements of each of the main negotiating areas, as well as beginning to confront and reconcile our differences on many important issues. We have a lot of work to do in 2014, but I am optimistic about what we’ll be able to accomplish in the coming year.”

TTIP in the Coming Year

The next round of TTIP negotiations will be held in Washington, D.C. from March 16 – 20, 2014.  In this fourth round, negotiators expect to work on the wording of provisions designed to ease compliance with existing rules.  Negotiators also expect to draft agreement language to enable U.S. and EU regulators to work together as they draft their respective domestic regulations in the future.  Specific provisions to be addressed in this fourth round will include rules on food safety and animal and plant health, as well as technical regulations, product standards, and testing and certification procedures.  Taken together, these items are often referred to as “Technical Barriers to Trade” (TBTs).

The Chief Negotiator for the EU made clear that, although this set of negotiations will focus on the reduction of TBTs, “TTIP is not and will not be a deregulation agenda.”

This statement exemplifies the numerous conflicts that the negotiators will face in the coming year.  They will have a mandate to harmonize two regulatory systems, reducing the NTBs and TBTs without overly compromising or placing inordinate burdens on either system.  In other words, the negotiators must aim to reduce regulatory barriers without having a deregulation agenda – a tough target to hit.

From that conundrum, potential snares for the negotiating team only multiply.  Interest groups and protectionist factions from both sides of the Atlantic will continue to actively oppose the partnership.  Some Europeans will raise an objection that the deal gives away too much to American business interests.  Further, the voices of labor unions, consumer advocates, environmental groups and other skeptics in opposition to TTIP may grow louder as the parties get closer to a final agreement.  Finally, political sways – a backlash against NSA monitoring of European communications as well as elections in the U.S. and EU in 2014 – may adversely affect the ongoing negotiations.

TTIP proponents remain optimistic, however, confident that a deal can be completed by the end of 2014.  We will keep an eye on developments and report on how nimbly these negotiators can manage the myriad concerns to achieve a useful partnership for the economies on both sides of the Atlantic.

Article by:

Reid Whitten

Of:

Sheppard, Mullin, Richter & Hampton LLP

Bulgaria Adopts New Gambling Tax Regime

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Bulgaria has a new gambling taxation regime effective January 1, 2014, which, together with the reasonable and balanced regulations currently in place, makes the country attractive for local licensing and gambling operations based upon a low corporate tax and highly qualified and low-priced technical specialists. One and a half years after theGambling Act (“Act”) was introduced, the tax base for gambling has been changed and is now in line with good business practices: switching from a turnover base to aGross Gaming Revenue (“GGR”) base.

On December 19, 2013, amendments in the Act (“Amendments”) for liberalizing gambling regulation in Bulgaria passed successfully the second reading in the Bulgarian Parliament amidst tense disputes. The Amendments were promulgated in the National Gazette on January 3, 2014, and came into force effective January 1, 2014.

The Amendments assure that as of January 1, 2014, the taxation of any online games in Bulgaria will be based on GGR with a 20% tax rate. For games in which fees and commissions are collected (such as poker), the tax rate will be 20% of the collected fees. In addition, there is a single fee for issuing and maintenance of a five-year license in the amount of approximately EUR 50,000 (BGL 100,000). No annual fee will be required during the five years’ validity of the license.

Offline bingo and keno will be taxed at a 10% corporate tax rate.

The GGR-based taxation is not a part of the common tax system, but rather it is an administrative fee regulated entirely in the Act instead of the tax laws. Nevertheless, any operator who decides to have an establishment in Bulgaria can take advantage of a favorable and stable corporate tax – only 10%. The low corporate tax rate would apply only to operators who decide to establish a local company in Bulgaria, which might be strongly supported from other economic arguments – for example, a very well-educated and qualified labor force at insignificant costs.

The Amendments introduce a new requirement for any licensed operator not established in Bulgaria but established in any other EU/EEA country or Switzerland. Such operators must have an authorized representative in Bulgaria, but this would not constitute having a local business in the country for purposes of obtaining the 10% corporate tax rate. An operator, in all events, is required to have a local representative in Bulgaria, who should be authorized for representation before Bulgarian authorities and courts.

From a regulatory perspective, the Bulgarian gaming regime is now one of the most balanced in Europe. It does not require a local establishment and main server in Bulgaria for any foreign operator who decides to obtain a local Bulgarian license (nevertheless, a local control server in Bulgaria is required). There are no specific requirements for performing payments through a local bank or to make certain investments in the country. The operators are not required to operate a dot bg domain. Foreign operators – registered, investing, and having a main server anywhere within EU, EEA, and Switzerland – can apply for a license. Nevertheless, the restrictions the Act imposes on an applicant whose shareholder is an offshore company should be carefully considered in light of provisions of the Act relating to economic and financial relations with companies registered in preferential tax regime jurisdictions and their actual shareholders.

A significant number of online gambling operators are expected to apply for a license in Bulgaria. The first online operators have already submitted applications. They are eager to enjoy not only reasonable taxation but also liberal regulation. The Bulgarian government has further stimulated the licensing of online operators by approving amendments that allow the operator to be removed from the blacklist even before being granted a license if the online operator applies for such removal not later than March 31, 2014.

The Amendments also permit the operators to perform any other business activity apart from organized gambling, which was not the case until now.

The efforts of the Bulgarian Parliament are of major significance. Instead of concentrating on blocking measures (such as ISP and/or payment blocking), the government has focused on best practices and introduced regulations that motivate the online gambling operators to get a license and work not only in a balanced regulatory environment but also under a favorable tax regime. These changes are aimed at balancing and optimizing the new sector regulation model that was introduced back in 2012. They give the online operators promising conditions to work legally in the Bulgarian market. At the same time, the new regulations impose stricter administrative sanctions on illegal online gambling operations.

Nadya Hambach, of Velchev & Co., authored this article.

Article by:

Dickinson Wright PLLC

4th Cir. First to Apply "Disability" Definition Under ADAAA – ADA Amendments Act of 2008

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On January 23rd, in a ground-breaking decision under the ADA Amendments Act of 2008 (“ADAAA”), the United States Court of Appeals for the Fourth Circuit held that an injury that left the plaintiff unable to walk for seven months and that, without surgery, pain medication, and physical therapy, likely would have rendered the plaintiff unable to walk for far longer can constitute a disability under the Americans with Disabilities Act.  The Fourth Circuit in Summers v. Altarum Institute, Corp. indicated that it is the first appellate court to apply the ADAAA’s expanded definition of “disability.”

The Court reversed a District Court’s dismissal of the plaintiff’s case pursuant to a Rule 12(b)(6) motion.  The U.S. District Court for the Eastern District of Virginia based its dismissal of the plaintiff’s disability-based discharge claim on its view that the plaintiff’s impairment was temporary and therefore not covered by the Americans With Disabilities Act. In its reversal, the Fourth Circuit held that the plaintiff “has unquestionably alleged a ‘disability’ under the ADAAA sufficiently plausible to survive a Rule 12(b)(6) motion.”

Article by:

Timothy M. McConville

Of:

Odin, Feldman & Pittleman, P.C.

Let the Light of Day Shine Re: SEC (Securities and Exchange Commission) Insider Trading Case

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We want to spend a moment talking about an old subject—the Securities and Exchange Commission’s insider trading case against Mark Cuban—and Cuban’s new business venture that has resulted from that case. The case, the SEC’s handling of the matter, and Cuban’s reactions (then and now) say a lot about how “the G” does business and may even be revelatory in the future.

As you recall, the SEC charged Cuban with insider trading in 2008. The case was originally dismissed by the trial court. The Fifth Circuit Court of Appeals reinstated the case, concluding that the inquiry into whether Cuban had, in fact, traded on the basis of material, non-public information was simply too fact-intensive for the trial court to have decided without a full factual inquiry.

This, of course, is the problem with fraud-based government enforcement: the question of a person’s intent is difficult to determine without an expensive factual inquiry—and the costs of such an inquiry (combined with the potential consequences) are so high that many people settle with the G rather than seek to exonerate themselves. Historically, the SEC “extorted” settlements (not our view, necessarily, see Al’s Emporium Commentary in the Wall Street Journal Online Edition as of October 19, 2010) in reliance on this heavy burden. At the heart of the SEC’s effort was the “no admit or deny” settlement.

In these settlements, the SEC would recite each allegation of wrongdoing against a defendant as well as the terms under which the defendant had settled the charges. The defendant would neither admit nor deny the SEC’s allegations. Since Mary Jo White took over at the helm of the SEC in April 2013, she purportedly has set a new course, requiring that defendants must admit wrongdoing in more and more settlements—whether or not that changes the seemingly extortive nature of these cases remains to be seen.

But Cuban, with his seemingly unlimited resources and non-retiring personality, would not be extorted. He fought back, all the way through trial, and won. Ultimately, a jury of Cuban’s peers concluded (among other things) that the SEC had not proven that Cuban received confidential information, that he traded on such information, or that he had acted knowingly or recklessly (with “fraudulent intent”) when trading. (See the Associated Press’ “Big Story” on October 16, 2013, which has a digital recreation of the jury verdict form).

When he walked out of the courtroom, Cuban went ballistic on the SEC. See his comments on YouTube – his specific comments about the SEC are found beginning about the 50th second of the clip.

“When you put someone on the stand and accuse them of being a liar, it is personal,” he said, criticizing specific members of the SEC’s staff and, generally, the SEC’s enforcement practices. Since then, Cuban has reinforced his criticism, stating: “There’s such a revolving door, and [the SEC] was run by attorneys with an attorney’s mind-set looking for their next job. It’s a résumé builder,” [Cuban] said. “No wonder they say or do whatever they damn well please. I’m like, ‘OK, I’m going to start calling them out by name.” (WSJ’s Law Blog)

Cuban isn’t stopping with these castigatory remarks. He is putting his money where his mouth is. Cuban’s latest business venture is to publicize SEC trial transcripts (which are not generally publicly available). Cuban hopes that, by publicizing trial tactics and tactics he believes are problematic, he will change the way this agency of the G does business.

Article by:

Vincent P. (Trace) Schmeltz III

Of:

Barnes & Thornburg LLP