Author Archives: Mark Rosen

Salaried Employees are Paid Overtime, The Right System for Paying it can save Countless Dollars

One Hundred Dollar bill with Marijuana leaf on top of it.

One of the biggest reasons that employers get sued for wage violations, is they think that they do not need to pay their salaried employees overtime. Salarieed employees get overtime, unless they meet one of the exemptions (exceptions) from overtime requirements under the Fair Labor Standards Act (FLSA). Basically, if an employee is entitled to overtime pay as an hourly worker, they are, usually, entitled to overtime pay as a salaried worker.https://www.dol.gov/whd/regs/compliance/whdfs23.pdf

An employer can save money on overtime by paying a salary, under certain circumstances, but setting up such a system is best done by an experienced employment lawyer, because getting it wrong can cost you countless lawsuits. When I represented plaintiffs, I brought cases against large companies that used employment firms to design their pay systems, and I found ways to get my clients substantial sums. It is not just necessary to get it most of the way right, if an employer plans to save money by taking advantage of labor laws, the employer does not just have to get it right, but perfect, to get out of a lawsuit.

If a small employer wanted to move someone from hourly to salary to save a few dollars on overtime, then as an employment lawyer I would advise that is a poor decision. However, if a medium or large company is considering moving multiple employees to salary, to save on overtime, it is worth consulting with an employment lawyer.

There are two factors. The first is if the number of hours the employee works varies throughout the year. The second is what the employer and and the employee understand the salary is meant to cover. A worker and employer cannot agree that no overtime payment is owed for hours worked over forty per-week. An employer must pay over-time for hours worked over forty per-week, the only question is whether payment is one-half times the regular rate, or one-and-one-half times the regular rate.

The first factor has to do with the Fluctuating Work Week Method, codified at 29. U.S.C. § 778.114. https://www.law.cornell.edu/cfr/text/29/778.114 The Fluctuating Work Week Method allows an employer to save money by paying less per-hour in regular hourly rate, and one-half that rate for every hour over forty worked in a week. A lot of large companies use this method. Basically when a worker’s hours fluctuate throughout the year, so some weeks the worker works more than forty hours, and some weeks the worker works less than forty hours, but the worker is paid the same base salary, the worker can be paid less in overtime, to make up for the times when the worker works less than forty hours and still makes the salary. When executed properly, this system can save a company an enormous amount of money in overtime payments, because the overtime rate is one-half of the number gotten when the total weekly salary is divided by the total number of hours worked that week.

While the Fluctuating Work Week Method is very attractive, strict compliance with countless conditions is necessary, requiring a meticulously structured system with built-in safeguards.

The second factor is what the understanding of the salary is between the employer and employee. https://www.law.cornell.edu/cfr/text/29/778.108 Does the employee and employer understand that the salary is to cover all hours worked in a week, or does the salary cover a specific number of hours per-week.

If the understanding with the employee is that the salary is to cover forty hours per-week, then every hour over forty that the employee works, must be paid at one-and-a-half times the employee’s normal hourly rate. However, if the employee and employer come to an understanding that the salary is to cover fifty hours per week, from hours forty-one to fifty, the employer pays one half the normal hourly rate, and for hours fifty-one and over, the employer pays the worker one-and-a-half times their normal hourly rate. In order to get the regular hourly rate, to base overtime off of, the employer divides the salary by the number of hours it was intended to compensate, and that number is halved or paid at one-and-a-half times per-hour.

If the employee and employer agree that the salary is to compensate all hours worked in a week, no matter how many, all overtime hours are paid at the rate obtained by multiplying .5 by the weekly salary, divided by forty.

Written by: Joshua H. Sheskin, Esq., M.A. -Trial Counsel- Lubell & Rosen, LLC. 954-880-9500 JHS@LubellRosen.com

Is Obesity Covered by the ADA

Church & State

                Can you be denied a job based on your weight? Do you have to provide accommodations for overweight employees? The answer to the question of can I be denied a job because of my weight, just like the question of do I have to accommodate an overweight employee, depends on what jurisdiction you are in.

In Maine, New Hampshire, Massachusetts, and Rhode Island, the answer is that obesity is covered under the ADA. An employer in those states must accommodate an overweight employee under the ADA.

However, in Vermont, New York, New Jersey, Connecticut, Michigan, Ohio, Kentucky, Tennessee, North Dakota, South Dakota, Nebraska, Minnesota, Montana, Iowa, Arkansas, Wisconsin, Illinois and Indiana, an employer does not need to accommodate an overweight person based on the ADA, and you can be refused a job for being overweight. 

However, it is not as simple as that, and that is only a list of twenty-two states. Even within those twenty-two states the answer is not as straightforward as it may seem.

               

In 2018 the EEOC released guidelines regarding when obesity is considered a disability, and it found that the person’s weight must be beyond the normal limits, and result from an underlying psychological condition. https://www.natlawreview.com/article/does-obesity-qualify-disability-under-ada-it-depends-who-you-ask-us In the states mentioned above as not being a state where an employer has to accommodate someone for being overweight, under the ADA, the employer still may have to accommodate that person if their weight problem is the result of a psychological condition.

For the twenty-eight states not listed, the question remains whether the ADA covers weight problems. https://www.businessmanagementdaily.com/60437/is-obesity-a-disability-under-ada/

                For the twenty-eight states not listed above, there is a safe route you can take as an employer, if someone’s weight problem is the result of another disability, such as a phycological impairment, assume that you need to accommodate them. However, if the weight problem is not the result of another disability, four, out of five, of the Federal Appellate Courts, who have made decisions, have found that weight, alone, is not a disability under the ADA.

There is no guarantee that Federal Courts in the other twenty-eight states will rule one way, or the other, about whether being overweight qualifies as a disability under the ADA. However, the interpretations that a federal agency gives regarding its own guidelines, hold a lot of weight in the courtroom. On this subject the EEOC has interpreted their own definition of disability to only include being overweight, under the ADA, when it is the result of a psychological condition, not as a disability in and of itself. https://www.hrsource.org/maimis/Members/Articles/2016/04/April_19/Is_Obesity_a_Disability_Under_the_ADA_.aspx

By: Joshua H. Sheskin, Esq., M.A. -Trial Counsel- Lubell & Rosen, LLC. 954-880-9500 JHS@LubellRosen.com

Do Churches need to follow Federal Labor Laws?

Church & State

Can a Church fire me for having a disability, do churches need to follow the Civil Rights Act or Title VII of that act, does a church have to follow the ADA, does a church have to pay minimum wage and overtime (The Fair Labor Standards Act, FLSA), or can a church discriminate based on sex, are just a few of the interesting questions I get as a labor lawyer. Whether a religious institution must comply with Federal Labor Laws is a complex question, which I will try to bring some clarity to.

There is no simple yes, or no, answer as to whether a church must follow Federal Labor Laws. The answer is that it depends on who the employee is. The “it depends” answer, is, basically, the short version of the answer given by the Supreme Court, in a case called Hosanna-Tabor Evangelical Lutheran Church & School v. EEOC, 565 U.S. 171 (2012) (https://www.oyez.org/cases/2011/10-553). The “it depends” answer, is what a coalition of states is currently petitioning the Supreme Court for more clarity on. https://www.law360.com/california/articles/1212213/states-ask-high-court-to-clarify-ministerial-exception-

Churches have the absolute right to control who “shepherds their flock,” which is why in the context of labor laws there is something called the “Ministerial Exemption.” Meaning a church can chose whoever it wants as a religious leader, and fire whoever it wants as a religious leader, without worrying about Federal Labor Laws. A ministerial employee, as they are called, has a job on the basis of the church deciding they are who should lead the members’ spiritual lives, which can change at any time, for any reason, and those are decisions the government will not interfere with.

While obviously a priest, rabbi, imam, preacher, or reverend, is a ministerial employee, because they are clergy, who else working for a religious institution is a ministerial employee is more complex. The conflict arises from situations like the one the Supreme Court considered in Hosanna-Tabor Evangelical Lutheran Church & School v. EEOC, (https://www.supremecourt.gov/opinions/11pdf/10-553.pdf), in which a teacher at a church school attempted to sue under the ADA, because she was fired for having narcolepsy. The Court found that the teacher could not sue the school for firing her, because she had been through formal religious training, and had been chosen as a leader in Christian knowledge suited to pass on that knowledge, by the congregants of the Church. The teacher’s combination of special training in Christianity, and election as a religious leader by her congregation, the Court said, made her a ministerial employee who could not sue under the ADA.

There is no clear bight line that can be drawn as to who qualifies as a ministerial employee and who does not, however, there are some things that guide the determination. The title someone is given is not determinative but is also not irrelevant. Generally, if an employee has formalized religious education, in the institution’s religion, chances are they will be a ministerial employee. Also, anyone who is designated by a religious group, as a spiritual leader, will likely be a ministerial employee, if their work for the religious institution involves some level of giving spiritual guidance, or religious education, to other members of the religious organization. Hence, while office, and janitorial, staff, are, almost always, fully protected by Federal Labor Laws, the choir director, or education director, may not be. A religious institution can discriminate in any way it chooses when picking who its spiritual leaders are, but the institution must abide by Federal Employment Laws for all other employees.

Lubell Rosen’s Own Norman Segall, Obtains Reversal of Contempt Ruling by now-U.S. Attorney

Court Gavel close up

A Florida appellate court has overruled an order issued by the former Miami-Dade judge now serving as South Florida’s top prosecutor.

The Third District Court of Appeal ruled on Wednesday that U.S. Attorney for the Southern District of Florida Ariana Fajardo Orshan erred in issuing a contempt order against Robert Orban during her time as a Miami-Dade Circuit judge. Orban, the respondent in dissolution of marriage proceedings with his ex-wife Susan Rorrer, submitted an appeal after Fajardo held him in contempt for failing to make timely payments on outstanding attorney fees.

The appellate panel reversed and remanded Fajardo’s order, finding that the trial court abused its discretion with the decision. The Third DCA reasoned its decision in part because “Mr. Orban was not given the opportunity to purge the sanction imposed upon him.”

“Because the trial court did not make findings as to Mr. Orban’s ability to pay or his willful violation of the fee orders and did not include a purge provision in its contempt order, we reverse,” the opinion said. As recounted in Wednesday’s order, the Third DCA had previously ruled against Orban in March 2017 when it granted Rorrer’s motion for attorney fees against her former partner. Orban subsequently failed to make the payments required of him by the lower court’s orders, prompting Rorrer to enter a motion for sanctions against him.

The Third DCA’s opinion noted Orban satisfied his fee obligations by the time an evidentiary hearing was held on Rorrer’s motion in July 2018.


Read the opinion: 


“At the hearing, Mr. Orban, who was not represented by counsel, was current on all his fee obligations and testified about his inability to pay,” the opinion said. Although the hearing concluded with Fajardo finding Orban to be in contempt and ordering him to pay an additional $3,877.50 in attorney’s fees within thirty days, the appellate court singled out his testimony on his efforts to pay the fees on time.

“Mr. Orban provided evidence and testimony that he attempted to fulfill his obligations,” the opinon said, noting he “maxed out the credit lines on his property, borrowed money from his family, declared bankruptcy, borrowed against his life insurance policy, and fell behind on the mortgage to his home.”

The order added, “The trial court seemed to acknowledge Mr. Orban’s inability to timely pay by allowing him a grace period within which Mr. Orban could submit subsequent payments to Ms. Rorrer. But ultimately, the trial court found Mr. Orban in contempt and sanctioned him without making findings as to his ability to pay or whether he willfully violated the Fee Orders. This was error.”

The appellate court also ruled the lower court’s order neglected to provide a means for Orban to purge the sanction constituted “reversible error.”

Rorrer’s appellate counsel, Cynthia Greene with Young, Berman, Karpf & Gonzalez’s Miami office, declined to provide comment without consulting her client. Joanne Garone, the Pembroke Pines-based lawyer who represented Rorrer in trial court, did not immediately return requests for comment.

Coral Gables litigator Normal Segall represented Orban before the Third DCA. The Lubell & Rosen partner said the appeals court “got it right.”

“The judge didn’t give any reason for her decisions and didn’t make any findings as to why he was in contempt, probably because he wasn’t,” Segall said. “In the decision you could see what evidence Mr. Orban put on … She shouldn’t have held him in contempt, but she did.”

Originally written by Zach Schlein in the Daily Business Review

Cannabis Industry Vertical Integration- Endangered By Choice Of Conjunction

One Hundred Dollar bill with Marijuana leaf on top of it.

If a recent decision of the Florida First District Court of Appeal (Florida Department of Health, Office of Medical Marijuana Use, et al. v. Florigrown, LLC, et al., No. 1D18-4471) is upheld, there likely will be significant restructuring of the medical marijuana industry in the State. The cause of this uncertainty lies in the Florida Legislature’s choice of one conjunction, “and” instead of “or”.

Florigrown reviewed Florida’s scheme for regulating the medical marijuana industry through the development of a limited number of licensed “medical marijuana treatment centers” (“MMTC”).

In 2016, Florida voters approved an amendment to the Florida Constitution legalizing medical marijuana, under certain circumstances, the so-called “Amendment 2”. This amendment defined an MMTC, in relevant part, as “an entity that acquires, cultivates, possesses, processes …, transfers, transports, sells, distributes, dispenses or administers medical marijuana ….” Art. X, §29(b)(5) Fla. Const. (emphasis added).

In 2017, the Florida Legislature enacted enabling legislation, defining an MMTC, in relevant part, as “an entity that acquires, cultivates, possesses, processes …, transfers, transports, sells, distributes, dispenses and administers medical marijuana ….” §381.986(8)(e), F.S. (emphasis added). Based on the statutory definition, the Office of Medical Marijuana Use has required MMTCs to perform all the functions necessary to grow, process, and distribute medical marijuana, thus creating a vertically integrated industry.

After its application to become an MMTC was rejected, Florigrown filed suit, seeking a declaratory judgment and permanent injunction declaring §381.986, F.S. unconstitutional. The plaintiff also requested an order requiring DOH to grant Florigrown MMTC status. The trial court entered a temporary injunction in favor of Florigrown, which the State appealed.

On July 9, 2019, the First District Court of Appeal upheld (in part) the decision of the trial court. Although there were several procedural issues, the court addressed the substantive question – the definition of an MMTC. The court found the statutory definition of an MMTC “creates a vertically integrated business model which amends the constitutional definition of MMTC by requiring [through use of the conjunction “and”, rather than “or”] an entity to undertake several of the activities described in the amendment.” Further, “the statutory language directly conflicts with the constitutional scheme.” Florigrown, slip opinion at 6. The court made clear its view: “Our ruling that the vertically integrated system conflicts with the constitutional amendment thus renders the statutory cap on the number of facilities in section 381.986(8)(a) unreasonable.” Id, at 7. Thus, in the view of this court, the vertically integrated scheme for regulating the production, processing, and distribution of medical marijuana set forth in section 381.986, F.S., is unconstitutional.

If Florigrown is upheld (at this time it is not clear what action the State will take), Florida’s scheme for regulating the medical marijuana industry will need to undergo significant changes. Without vertical integration, each step in the process- growers, processers, packagers, etc., probably will need to be separately licensed or permitted. Initially, the current MMTCs are likely to have a competitive advantage. However, there will be opportunities for parties wanting to participate in various aspects of the industry. For example, if operating retail outlets is no longer limited to the MMTCs, Publix, or Walgreens may seek to offer medical marijuana to their eligible customers.

Assuming businesses in Florida’s medical marijuana industry are “just like” every other business is a serious mistake. Like everything else in Florida’s medical marijuana industry, the laws will keep changing, at least for the foreseeable future. Parties who want to participate in this industry need to become educated. They also need to work with knowledgeable attorneys and consultants, in order to obtain guidance and advice on how to legally accomplish their goals in this industry.

Written by: Stephen H. Siegel, Esq.

Orginally written in the South Florida Hospital News and Healthcare Report

For more information on Florida’s regulation of CBD and medical marijuana, please contact a member of Lubell/Rosen’s CannabisLaw Group.

Cynthia Barnett Hibnick, Esq. cbh@lubellrosen.com

Lori A. Sochin, Esq. las@lubellrosen.com

Stephen H. Siegel, Esq. shs@lubellrosen.com

14% of Americans Say They Use CBD Products

CBD Product Gallup poll found that one in seven Americans say they personally use cannabidiol (“CBD”) based products. Approximately 90% of all respondents indicated that they used CBD for medical or therapeutic reasons. Top reasons for use included 40% for pain, 20% for anxiety, 11% for sleep, and 8% for arthritis.

Since the 2018 Farm Act federally legalized the cultivation of hemp, and Governor Ron DeSantis signed a state hemp program into law in June 2019, the CBD industry is poised to become a multi-billion dollar industry in Florida. Although you can now find CBD products almost everywhere—hair salons, med spas, grocery stores, online, even pet stores–federal and state regulations are still in the process of being developed. But, even though regulations are not yet in place, the Food and Drug Administration (“FDA”) is enforcing violations of existing laws against CBD companies that make unproven or exaggerated claims of the medical benefits of CBD.

CBD companies, and business that sell CBD products in Florida, should seek legal counsel familiar with the rapidly evolving laws and regulations effecting the distribution and sale of CBD products. The lawyers of Lubell | Rosen’s Cannabis Law Group are available to assist you to be in compliance with the laws.

Written by: Cynthia Barnett Hibnick, Esq. and Lori A. Sochin, Esq.

For more information on Florida’s regulation of CBD and medical marijuana, please contact a member of Lubell/Rosen’s CannabisLaw Group.

Cynthia Barnett Hibnick, Esq. cbh@lubellrosen.com

Lori A. Sochin, Esq. las@lubellrosen.com

Stephen H. Siegel, Esq. shs@lubellrosen.com

Does SB 732 require Physicians practicing at Surgical Centers to have Insurance?

On June 25, 2019 the Governor of Florida approved SB 732, a new statute modifying the rules related to office surgery and surgical centers. The question many bare doctors in Florida are asking is whether SB 732 requires doctors working at surgical centers to carry malpractice insurance. The answer is no it does not.

While the new statute does require all MDs and Dos who work at surgical centers to maintain “financial responsibility”, it makes no changes to the existing definition or requirements of “financial responsibility.” Thus, there really is no change at all.

According to SB 732, “As a condition of registration, each office must establish financial responsibility by demonstrating that it has met and continues to maintain, at a minimum, the same requirements applicable to physicians in ss. 458.320 and 458.0085. Each physician practicing at an office registered under this section or s. 458.328 must meet the financial responsibility requirement under s. 458.320 or s. 459.0085, as applicable.”

458.320 and 459.0085 are the existing Florida financial responsibility statutes for MDs and DOs respectively. It is important to note that no changes were made to these statutes. Pursuant to these statutes medical doctors and osteopathic doctors may practice without insurance as long as they give notice to their patients of their financial responsibility and agree to satisfy any judgment up to the required amounts ($250,000 or $100,000).

Written by: Steve Lubell.

FDA Acts to Regulate the CBD Market

CBD Oil

It appears the days of unregulated CBD-based products are nearing an end.

On July 22, 2019 the Food and Drug Administration (“FDA”) sent a Warning Letter to a major producer and distributor of CBD in Florida and elsewhere. The FDA reviewed the company’s web site, which accepted orders for various CBD-infused products. The FDA concluded that the CBD products were “unapproved new drugs sold in violation of” various provisions of the Food and Drug Act (“Act”). Further, the agency concluded that the company’s CBD products were misbranded under the Act. The company’s CBD tinctures for pets also were determined to be “unapproved for new animal drugs that are unsafe and adulterated” pursuant to the provisions of the Act. The FDA advised the company: “Failure to promptly correct these violations may result in legal action without further notice, including, without limitation, seizure and injunction.”

Florida’s CBD businesses recognize there are many challenges yet to overcome. The FDA is not the only agency regulating these products. The Florida Department of Agriculture and Consumer Affairs also has jurisdiction over CBD products distributed in the state. Commissioner Nikki Fried has made clear the Department’s intention to regulate the production and distribution of CBD products in order to protect the public’s health and safety and to ensure that what is being sold matches what consumers understand they are buying.

Parties interested in becoming involved in the medical marijuana or CBD business in Florida (or elsewhere) will be well served to work with legal counsel and other consultants who have experience in this emerging industry. For the moment, it appears that the rush to capture the less-restrictive CBD market has encountered a very significant impediment. It is not possible to anticipate all the consequences of this development, but it seems likely the distribution of CBD products will be limited to those who take the time and invest the resources to ensure they are doing so correctly.

Written by: Stephen H. Siegel, Esq.

For more information on Florida’s regulation of CBD and medical marijuana, please contact a member of Lubell/Rosen’s CannabisLaw Group.

Cynthia Barnett Hibnick, Esq. cbh@lubellrosen.com

Lori A. Sochin, Esq. las@lubellrosen.com

Stephen H. Siegel, Esq. shs@lubellrosen.com

What You Can Do if You Have a Surprise Medical Bill

NBC 6 Responds has heard from consumers frustrated over medical bill disputes. In some cases, they have owed thousands of dollars more than expected. Experts say there are steps to take if you find yourself with a surprise bill you can’t pay.

Original Story Courtsey of NBC Miami Channel 6 News

Its Back! Binding Arbitration Requirements Between SNFs/Nursing Facilities and Residents

 

The Centers for Medicare and Medicaid Services (“CMS”) recently published a Final Rule modifying this agency’s arbitration requirements for SNFs and nursing facilities (collectively, “Facilities”) that participate in the Medicare or Medicaid program. 84 C.F.R. 34,718 (July 18, 2019).

Previously, on October 4, 2016, CMS published a Final Rule addressing the use of arbitration to resolve disputes between Facilities and their residents, or their family members or other guardians (collectively, “Residents”). 42 C.F.R. 483.70(n) (“483.70(n)”) The October 4 Final Rule stated: “A facility must not enter into a pre-dispute agreement for binding arbitration with any resident or resident’s representative nor require that a resident sign an arbitration agreement as a condition of admission to the LTC [long term care] facility.”   This total ban on pre-dispute arbitration agreements was opposed by a number of parties involved in the long-term care arena and enjoined by the United States District Court for the Northern District of Mississippi, Oxford Division on October 17, 2016.

In light of this injunction, as well as the change in administrations, CMS decided to review and revise 483.70(n). The July 18 Final Rule now permits a Facility to offer an incoming Resident the option of binding arbitration, as long as a number of conditions are met, including:

  1. Entering into a binding arbitration agreement may not be a condition of admission, or a requirement to continue receiving care at the facility and must explicitly inform the Resident of his or her right not to enter into the agreement.
  2. It is the Facility’s obligation to make sure the Resident receives an explanation of the agreement in a language he/she understands, the Resident provides written acknowledgment they understand the agreement, the agreement provides for the appointment of a neutral arbitrator, and the arbitration takes place at a location convenient to both parties.
  3. The Resident must have the right to rescind their agreement within 30 calendar days.
  4. The agreement must explicitly state that the Resident is not required to sign it as a condition of admission or to continue receiving care.
  5. The Resident cannot be prohibited or discouraged from communicating with any federal, state, or local officials.
  6. When a dispute between a Facility and a Resident is resolved through arbitration, the Facility must retain a copy of the binding arbitration agreement and the arbitrator’s decision for a period of 5 years thereafter.

CMS has withdrawn the agency’s total ban on the use of pre-dispute arbitration agreements. A Facility that wants to offer this option to new Residents should work with its legal counsel in order to ensure the Facility adheres to the guidelines contained in the Final Rule. Otherwise, a Facility may find itself with an unenforceable arbitration agreement and facing sanctions for attempting to impose such a requirement on Residents.

Can an Employee be Fired for Testing Positive for Medical Marijuana

  • The ADA Does Not Give an Employee the Right to use Medicinal Marijuana.
  • Even the 14 States that Protect Employees do not Protect All Employees, Nor Give Blanket Rights to Use Medicinal Marijuana, Such as Still Banning Use at the Workplace.
  • Recent Shifts in Law, and Trends in Law have Favored Employees Being Able to Use Medicinal Marijuana.
  • The ADA Does Not Give an Employee the Right to use Medicinal Marijuana.

Now that all but four states have Medical Marijuana, Recreational Marijuana, or CBD/THC Low Dose Use, Laws, a common question I get from employers is “can I fire an employee for testing positive for medical marijuana?” Of course, employees ask, “can I be fired for testing positive for using medical marijuana?”

The answer is that it depends on what state you are in and the job being performed. In New York, Arizona, Arkansas, Connecticut, Delaware, Illinois, Maine, Massachusetts, Minnesota, Nevada, Pennsylvania, West Virginia, and based on a recent ruling, most likely, New Jersey, specific state laws protect some medical marijuana users from being fired for using medical marijuana. However, in states like Florida, Colorado, Georgia, Washington, Ohio and California, there are no state laws against firing someone for using medical marijuana https://www.nolo.com/legal-encyclopedia/state-laws-on-off-duty-marijuana-use.html.

Whether medical marijuana use is grounds for termination, not hiring an employee, or denying workers compensation benefits, is a major issue employees, and employers, face today. There was an 81% increase, between 2014 and 2018, in post-worksite-accident positive drug tests, and a 20% minimum increases of positive test results, between 2015 and 2017, for the transportation, manufacturing, and construction industries https://www.businessinsider.com/the-future-of-marijuana-drug-testing-at-work-2019-4.

The ADA does not extend to medical marijuana, because Section 12114(a) of the ADA states that an employer is not obligated to accommodate an employee’s use of drugs prohibited under Federal Law. Even if Marijuana is legal under state law, it is not legal under Federal Law. Hence, the ADA does not require an employer to accommodate a medical marijuana user. To date, Federal Courts have held that the ADA does not apply to medical marijuana use.

The ADA does not require medical marijuana use to be accommodated an employer, and the law has been slow to develop in this area, because of the ambiguity created by marijuana being illegal under Federal Law but not under some states’ laws. In New Jersey, last month, an appellate court ruled that the state’s ban on disability-based employment discrimination includes medical marijuana, and the laws in most states are evolving, albeit slowly https://www.governing.com/topics/mgmt/gov-medical-marijuana-legalization-workplace-policies.html.

However, even in states that have protections for some medical marijuana use, use is, usually, not protected when on the worksite, by workers in safety sensitive positions, or for workplaces that fall under The Drug Free Workplace Act. Meaning, in a state with protections for employees using medical marijuana, a salesperson at Best Buy is probably protected, a waiter is probably protected, but a bus driver, a crane operator, a teacher, or an employee of a company receiving Federal Funding, are probably not protected.

Even if the state prohibits employers from taking steps against employees who test positive for medical marijuana, Federal Law still prevents some employees from using medical marijuana. Laws such as The Drug Free Workplace Act, or the Department of Transportation’s prohibition on substance abuse for commercial drivers, are examples. The Drug Free Workplace Act requires employers who receive federal grant money, or contract with the government, to maintain a drug free workplace. A person who tests positive for medical marijuana, whose employer is taking Federal Money or contracts, can, often, be fired despite state laws protecting them.

If you are in a state that requires an employer to accommodate medical marijuana use, you may need to accommodate an employee’s use of medicinal marijuana. In Nevada, and New York City most pre-employment drug testing for marijuana is banned entirely https://www.usatoday.com/story/news/nation/2019/06/12/nevada-first-state-employment-marijuana-testing/1440037001/ & https://www.natlawreview.com/article/nyc-bill-banning-pre-employment-marijuana-drug-testing-becomes-law. However, even in the liberal state of California, the recreational marijuana laws allow employers to prohibit their employees from consuming cannabis. Hence, even the laws of the city where a company is located may affect whether the use of medicinal marijuana is protected for employees.

To conclude an employer can fire an employee for testing positive for medical marijuana in all but fourteen states. In fourteen states there are rules protecting users of medical marijuana, however, when Federal Law prohibits use, or when a person falls into a safety-sensitive classification or occupies a position of public trust, even in the fourteen states with protections for employees, an employee can still be fired, in some cases, for using medical marijuana. The employment regulations in nineteen states, which allow medical marijuana use, do not prohibit an employer from firing an employee for using medical marijuana.

There are trends in the law that indicate that the remaining nineteen states are taking steps to conform their employment regulations to their medical marijuana laws. That is why it is important to consult a labor attorney in your own state, before you take action, when an employee tests positive. The law changes all of the time, today there are nineteen states that do not protect workers, but by next week that number could be fifteen, or a Federal Court Decision can change if the ADA protects medical marijuana users. You need to make sure that you are up to date before you make an employment decision based on a drug test result, the only way to know for sure if you are complying with the latest regulations, is to call a labor lawyer and ask.

By: Joshua H. Sheskin, Esquire, M.A., Trial Counsel Lubell Rosen, 954-880-9500 jhs@lubellrosen.com.- Mr. Sheskin focuses his practice on both state, and federal, employment and business defense cases, including ADA, FLSA, EEOC, sexual harassment, and liability issues arising from business disputes.

Disruptive Patients – What to Do?

DISRUPTIVE PATIENTS- What to do?

A physician, who is a client of the firm, recently asked for our assistance in dealing with a new patient who already had disrupted the practice. Because of the disruption caused by this patient during their first encounter with the practice, the physician decided they did not want to run the risk of taking on this patient and having them further disrupt the practice. The physician reached out to us at the time the patient arrived for their initial appointment.

I recommended that, because the patient was already at the office, the physician should do three things:

  1. (i) Determine whether there is a contract between the practice and that patient’s payer and, if there is, what are the terms under which a physician can decline to treat a patient;
  2. (ii) Provide treatment in order to avoid the possibility that the patient needed emergent care or an allegation of patient abandonment; and
  3. (iii) Deliver written notice to the patient that the practice declined to treat this individual on an ongoing basis and that the patient has thirty (30) days (or whatever the contractually mandated period is) to locate another physician.

Unfortunately, everyone who comes to a physician for treatment is not polite, well mannered, and compliant. Sometimes a patient (whether new or ongoing) is rude, disrespectful, non-compliant or otherwise disruptive to the practice. Medical practices do not like to terminate patients, but sometimes it is necessary in order to maintain the smooth operation of the practice and the well being of its employees and other patients.

If you are having difficulty dealing with disruptive patients, or any other matter involving your practice, please feel free to reach out to me.

By Stephen H. Siegel

Do Websites Have to Comply With the ADA?

The sort answer to the question of whether websites have to comply with the ADA is yes. If the business has a physical location visited by the public, the website that establishes the online presence of the brick and mortar business must comply with the ADA. That is the short answer, and it is the conclusion that one can draw from seeing how successful cases against companies in Florida have been, and how prevalent they have been, in recent history, as described in this article, https://www.jdsupra.com/legalnews/the-current-landscape-of-website-18986/ but that I will also explain below.

The long answer is that the 11th Circuit Court of Appeals, which is binding on Florida, Alabama and Georgia, has held in two cases that a business can be sued over its website not being ADA complaint. The most recent of these decisions was a case involving Dunkin Doughnuts, and an article on that case, can be found here, https://www.levelaccess.com/time-make-website-accessible-court-appeals-allows-ada-lawsuit-dunkin-donuts-proceed/. If you are in Florida, Alabama and Georgia, then chances are your businesses website has to be compliant. Most other Courts around the country have also held that websites have to be complaint with the ADA, but only the 11th and 9th Circuits have come out with binding decisions on the matter, an article on the 9th Circuits ruling can be found by clicking here, https://www.law.com/nationallawjournal/2019/04/30/ninth-circuit-reaffirms-applicability-of-ada-to-websites/?slreturn=20190431151923.

But there are some websites that do not need to be compliant. If a potential customer does not need the website, or the information on the website, to enjoy the physical location, then it is questionable whether the website must comply. However, the bar for that is incredibly low, having store locators on your website, or advertising a special or sale, is usually enough.
The question is what ADA standards a website needs to be complaint with and why. The answer is unclear at law, and no one answer can be given. However, generally compliance is sought with WCAG II guidelines. WCAG stands for Web Accessibility Guidelines and they are now on the second set of Web Accessibility Guidelines. The requirements of WCAG II are technical and involve the ways your website is coded. If you are a programmer, and want to know what the WCAG II says in terms that computer programmer understand then click on the following link to access them, https://www.w3.org/TR/WCAG20/.

However, if your question is why does a website need to be complaint with the ADA, the answer is simpler than understanding how WCAG II requires computer programmers to code. Those who are visually impaired use screen readers to operate computers and access the internet. Long ago Windows and Microsoft Programs became readable by screen readers. However, the vast majority of websites are not compatible with screen readers. What that means is that when a website does not meet WCAG II standards, most screen reading software will not read the website to a visually impaired individual, and that means that a visually impaired person cannot use the website at all.
By: Joshua H. Sheskin, Esq., Trial Counsel Lubell & Rosen LLC. Joshua Sheskin’s practice focuses on business defense, labor, and ADA Advocacy, you can contact Joshua Sheskin at 954-880-9500 or jhs@lubellrosen.com.

You can get Sued because you take certain Precautionary Measures in light of #MeToo

One of the most difficult things for an employer to do is decide how to respond to the #MeToo movement. It is a difficult thing to know what to do to react to the movement as an employer. On one hand you do not want to worry about a lawsuit, on the other hand you do not want to go overboard and turn your workplace into a miserable place to work because of militaristic over regulation of employee behavior. What is happening often in response to the #MeToo movement and can be just as dangerous as a #MeToo Claim, for an employer, is that male executives and leadership are refusing to “risk a problem” by refusing to mentor, and work, with female employees. This has a terrible and unintended consequence, which is that these companies open themselves up to an EEOC action for discrimination. Refusing to mentor, or work with, female employees denies them opportunities for advancement. Denying an opportunity for advancement because a business is not working to advance women, can lead to a very expensive EEOC Lawsuit.

There are measures that can be put in place to protect an employer, even in the #MeToo era. There is no question that properly setting up preventative policies, putting in place systems to deal with harassment, and establishing rules that covey zero-tolerance, is how a business can defend itself, without over regulating its employees, or risking a discrimination suit. When a claim is made by an employee because of a sexual harassment in the workplace accusation, you must have protected yourself through proper employment policies, proper procedures to handle complaints, and a zero-tolerance approach. These things are not overly complex to set up, for an experienced employment attorney, but the wording, and exact policies, are incredibly specific if you wish to gain the maximum protective benefits.

Joshua H. Sheskin, Esq. practice focuses on employment and ADA litigation, with an emphasis on representing and defending local businesses, along with assisting them in preventing future potential lawsuits. To find out how you can protect your business feel free to contact Joshua H. Sheskin, Esq., jhs@lubellrosen.com or call 954-880-9500 .

SB 732 (the “Act”) and The Many Questions it Brings

As you may be aware, during its 2019 session the Florida Legislature passed a substantial revision to the State’s regulations concerning certain in-office surgical procedures. The new revision, SB 732 (the “Act”), amends 456.074, F.S. and adds 458.328 and 459.0139, F.S. (for allopathic and osteopathic physicians, respectively). Under the Act, certain liposuction procedures, Level II, and Level III office surgeries performed in a physician’s office that has registered with the Department of Health (an “Office”), unless the facility is in an acute care hospital or licensed abortion clinic. Among other things, the Statute also requires:

  • Each Office must designate a physician who is (i) responsible for that Office’s compliance with the requirements, (ii) has full, active and unencumbered licensure, (iii) and practices in that Office. (Note: The Statute does not indicate whether a physician can serve in this capacity for multiple Offices.)
  • Florida’s physician financial responsibility requirement is now extended to each Office.
  • Each physician who practices at an Office must notify the department in writing whenever they begin or end their practice at an Office.
  • The department is required to inspect each office annually and, if it finds an Office out of compliance, may not only revoke its registration, but also prevent its principals from performing office surgeries for as long as 5 years.
  • A physician who performs office surgeries outside of an Office, or other exempt facility, may be fined $5,000 per day. NOTE: It also is likely that physician will face disciplinary action by their licensing board and possible exclusion from participation in Medicare, Medicaid, and other Federal health care programs.
  • The Statute will become effective on January 1, 2020.

Stephen H. Siegel focuses his practice on assisting clients (primarily in the healthcare industry) achieve their goals while minimizing the associated business and legal risks. If you have any questions about SB 732 and how it can effect you or your practice feel free to contact Steve Siegel, shs@lubellrosen.com or 305.655.3425, if you would like a copy of SB 732.

Marriage, Minimum Distributions, and Mayhem: A Discussion of IRA’s under Florida’s New Elective Share Statute

This article was originally published in June 2002 by Kristen M. Lynch for The Florida Bar Journal. The original article can be found here: source

On October 1, 2001, Florida’s new elective share statute, new F.S. §732.2035(7), became effective. To most, this would not seem to be an event of utmost significance, but to those of us dealing in the world of IRA administration every day, this means change.

Historically, IRAs and qualified plans have not been subject to probate administration in Florida. As such, they have not fallen under the jurisdiction of the personal representative other than for purposes of filing appropriate tax returns unless the assets were left to the decedent’s estate. Since IRAs and qualified plans now fall under the second tier1 of the three-tier priority system imposed by the elective share statute, this presents new potential problems. For purposes of this discussion, envision a scenario in which the decedent had significant IRA monies and no other property except homestead owned jointly with the surviving spouse, which does not enter into the elective share calculation.

Challenges in Estate Planning with IRAs

Estate planning has become more difficult with changes in estate tax laws and the specter of the new elective share. IRAs have always presented special estate planning challenges because of ownership restrictions and because an IRA cannot be given away intact during lifetime by the IRA owner. The IRS released new proposed Treasury regulations on January 12, 2001, and new final IRA regulations on April 16, 20022 ( IRA rules), simplifying administration during lifetime and providing new postmortem planning opportunities. However, when one now combines the application of the elective share statute with the IRA rules, the results can be somewhat unsettling.

Goal of Planning with IRAs

In general, the name of the game with IRAs is tax deferral. Monies are not taxable until they are distributed to a beneficiary, at which time the distribution is taxed as ordinary income at the beneficiary’s tax rate. The length of income tax deferral available depends on who is considered a “designated” beneficiary under the new proposed IRA rules which means an individual or a trust that is both valid under state law and irrevocable by its own terms upon the owner’s death. Under these rules, the measuring life for postdeath distributions is based on the designated beneficiary (or beneficiaries if there are separate shares) left standing on September 30 of the year after the year of death. In a best-case scenario, a nonspouse beneficiary could look forward to taking distributions from the IRA over his or her own life expectancy. If the IRA is left to the decedent’s estate, no beneficiary has been named, or if there are multiple beneficiaries and one is not an individual, the IRA will be deemed to have no designated beneficiary. Subsequently, distributions will be made based on the remaining single nonrecalculated life expectancy of the decedent3 if the decedent died after the required beginning date (RBD). If the IRA owner died prior to the RBD, distribution will need to be made by December 31 of the year containing the fifth anniversary of the decedent’s date of death. This certainly hampers the benefits of tax-deferred growth that might have otherwise been available.

Spouses are the only beneficiaries who can inherit IRA or qualified plan assets and roll them into his or her name, or simply change the name on the account. Furthermore, when a spouse does roll over assets, all future distribution dates revolve around the surviving spouse’s date of birth, rather than that of the deceased owner. Considerable tax benefits could be gained by leaving IRA or qualified plan assets to a spouse. Not only would these assets be subject to the unlimited marital deduction for estate tax purposes, but also there could be substantial deferral of income taxes, particularly if the surviving spouse is younger than the decedent.

Administrative Issues in Real Practice

No laws limit the right of a beneficiary to demand immediate distribution of a decedent’s IRA. In the case of an IRA, if children are named and there is a valid beneficiary designation and valid death certificate, there is currently nothing that would prevent an IRA trustee or custodian from promptly distributing those assets to the nonspouse beneficiaries. All this could transpire well in advance of the surviving spouse even filing for the election.4 This presents many potential problems. First, what happens if the children take distribution of the IRA assets in one tax year and pay income taxes on them, and then the IRA is determined to be part of the property necessary for contribution to the elective share? At a minimum there would be amended tax returns required, or possibly an award net of taxes, although the IRS might not be happy with that result if the surviving spouse were in a significantly higher tax bracket than the children. Second, if the spouse is awarded part of the IRA after the IRA monies have been distributed to the children and physically out of an IRA account for more than 60 days, the opportunity for rollover would seem to be lost. Finally, let’s assume that the decedent’s IRA trustee or any other trustee or custodian established beneficiary IRAs for each child. Florida has a creditor protection statute5 specifically exempting participants’ and beneficiaries’ interests in qualified plans and all types of IRAs from the claims of creditors. The only exception is if there is a valid QDRO in place.6 Furthermore, the Internal Revenue Code recognizes two categories of people or entities: participants and beneficiaries. If the spouse is not the designated beneficiary of the IRA or plan, then how do we categorize the spouse? If these were probate assets, the spouse might be considered an heir at law. However, IRAs and qualified plans are nonprobate assets and most documents have very specific beneficiary designations providing for succession in the event that a beneficiary predeceases. If, indeed, the spouse is not considered to be a beneficiary, and only the decedent can be the participant, arguably the spouse could be considered a creditor. If they were not in the position of a creditor, then it would seem that the spouse could not require the distribution of IRA assets to him or her unless they actually have a QDRO issued. The New York elective share statute specifically indicates that under the elective share the spouse is not to be considered a creditor.7 The Florida statute is silent in this regard.

When the Supreme Court of Florida granted an emergency petition for amendments to the probate rules and elective share statutes, the following language was included in its decision: “5. Although the committee expressed concern that §732.2145, Florida Statutes, is unclear whether the order is to be considered a judgment for purposes of statutory interest because it contains reference to both the order and to a judgment for the amount of the contribution, the committee proposal includes requirements for the order of contribution. The committee felt that this discrepancy could be left to the courts and general law for clarification.”8 This would seem to indicate that the decision of whether an elective share allocation would be considered a court order or a judgment, unenforceable against an IRA by virtue of current statutory law, will be left for the courts to decide.

IRAs, the IRS, and the Surviving Spouse

Spouses have traditionally gotten special treatment in regard to retirement accounts. There are several new potential complications that could arise relating to the manner in which a portion of the IRA might be awarded to a spouse. First, let’s examine the potential tax deferral issues. As a reminder, the identity of the beneficiary and whether it is a valid “designated” beneficiary determines what options are available for the deferral of income tax after the death of the IRA owner.

For purposes of distribution planning, if there are multiple “designated” beneficiaries, they are required to use the life expectancy of the oldest beneficiary. If there are multiple “designated” beneficiaries and one or more other beneficiaries that are not “designated,” then the beneficiaries are limited to using the remaining nonrecalculated life expectancy of the deceased IRA owner if the owner dies after the RBD. If death is prior to the RBD, complete distribution must be made by December 31 of the year containing the fifth anniversary of the IRA owner’s death.

This begs the question that if the surviving spouse would inherit any portion of the IRA by way of the elective share, are the other “designated” beneficiaries going to be deprived of the income tax deferral based on their life expectancies or the life expectancy of the oldest beneficiary? This might happen if the elective share issue is not determined by September 309 of the year after the IRA owner’s death. This seems more probable under the final regulations since the IRS accelerated the determination date from December 31 to September 30 of the year following death and the window for filing for the elective share is the earlier of six months from receipt of notice of administration or two years from the date of death of the decedent.10 Furthermore, new proposed regulations §1.401(a)(9)-4, A-1 specifically state that “the fact that an employee’s interest under the plan passes to a certain individual under applicable state law does not make that individual a designated beneficiary unless the individual is designated as a beneficiary under the plan.” Also contained in the preamble of the new final regulations under “Explanation of Provisions” is the following:

The period between death and the beneficiary determination date is a period during which beneficiaries can be eliminated but not replaced with a beneficiary not designated under the plan as of the date of death. In order for an individual to be a designated beneficiary, any beneficiary must be designated under the plan or named by the employee as of the date of death.

This would seem to imply that if the spouse is not a “designated” beneficiary, then the rights and privileges afforded a spouse as beneficiary may not be available to a surviving spouse that would take the IRA by operation of law. It would appear that in order for a spouse to be considered a designated beneficiary, someone would have to disclaim in the spouse’s favor, rather than merely awarding the IRA to them as an operation of law. In the past, there have been numerous private letter rulings where spouses were allowed to roll over IRA assets when all beneficiaries of an estate or trust disclaimed, or when the IRA has been left to the estate and there is an elective share challenge.11 Previous private letter rulings involving elective share issues with IRAs are distinguishable because in all of those cases the IRAs were left to the estate of the IRA owner. In those situations where the trust or the estate was named as beneficiary, the IRS was able to justify the rollover based on the spouse being a member of a class that was named on the beneficiary designation. The IRS has also indicated that their current intent is not to afford the same deferral opportunities to estate beneficiaries as they would afford to direct beneficiaries or trust beneficiaries. This remains to be clarified.

The second issue involves the written waiver of rights to qualified plan property made by the spouse prior to the death of the decedent. The elective share statute does not specify this to include ERISA waivers (which are required prior to rolling most assets into an IRA from a qualified plan), but apparently the Augmented Share Committee intended for ERISA waivers to be included since they are specified in the committee notes.12 There are two basic types of ERISA waivers: qualified joint and survivor annuity waivers (QJSA) and qualified preretirement survivor annuity waivers (QPSA). These waivers require the signature of the nonemployee spouse in order to distribute monies out of the plan in an alternate form, such as rolling over plan assets into an IRA. Spousal consent is not required for distributions made in the form of a QJSA,13 but it is required for any distribution prior to the normal retirement age, as well as when payments are subject to immediate distribution. These requirements apply to all defined benefit plans and any defined contribution plan that is covered by IRC §412, meaning that money purchase plans are included but profit sharing plans and stock bonus plans are exempt. The plan document can also require waivers even if federal law does not. If taken literally, the elective share statute would include any ERISA waiver that a spouse would sign in order for the participant to execute a rollover into an IRA.

Section 205 of ERISA sets out the procedural requirements for a spouse to effectively waive his or her rights.14 Furthermore, for a waiver of any right to be effective under Florida law, it should be an informed waiver, and after marriage full disclosure is required.15 One of the problems this may present is that many plan trustees and administrators are out of state and more than likely unaware of the elective share statute. When a participant/employee is about to retire, they are usually sent a packet of forms to be completed to accomplish a rollover of their pension or qualified plan assets into an IRA. The spousal ERISA waiver is usually required at that time. It would seem highly unlikely that a plan trustee or administrator would advise a spouse that by signing the ERISA waiver they are effectively waiving their rights under Florida’s elective share statute. Furthermore, most participants and their spouses do not seek legal advice or, for that matter, professional counsel at all, when executing rollover forms. Consequently, the likelihood of the ERISA waiver being a truly informed waiver appears remote.

IRAs are not covered by ERISA or REA and do not require that a spouse be named as beneficiary. F.S. §732.702(2) requires each spouse to make a fair disclosure to the other of his or her estate if the waiver is executed after marriage. This presents a unique problem in that the spouse could sign an ERISA waiver to allow the rollover to occur, being fully informed of the value of the plan assets at the time of the rollover, with the understanding that the spouse would be named as the primary beneficiary of the IRA. Then, after the rollover has been accomplished, the IRA owner could change the designation to anyone he or she pleases. Subsequent changes to the IRA beneficiary designation do not require subsequent notice or waiver.

Another practical problem this may present is that many IRA owners combine their rollover accounts with their contributory accounts and, perhaps, even accounts that accept self-employed pension (SEP) contributions. If an IRA holds a combination of rollovers, IRA contributions and SEP contributions, including some rollover funds for which a waiver has been signed, does this negate the ERISA waiver? The elective share statute is silent on this point. If the ERISA waiver was deemed to apply only to the assets that were originally waived and rolled over, who would be responsible for reconstructing the earnings attributable for those assets? Given the often transient nature of IRA accounts, it would probably prove a difficult if not impossible task to reconstruct the sources and earnings of all funds involved, especially if the decedent had moved the account between institutions frequently. It remains unclear if a retroactive accounting would be required, and if so, whether the responsibility would fall to the personal representative or to the IRA trustees and custodians. If it is ultimately determined that the ERISA waiver would still apply to the funds originally waived, it will most likely require that IRA trustees and custodians change the way that we do business. In the past, IRA funds have been segregated if there were different beneficiaries or if part of the money was rollover money and there was a possibility that the IRA owner might want to roll those funds over to another qualified plan at some point in the future. Under EGGTRA, retirement funds are even more portable than before and this problem will be compounded if regular contributory and rollover IRAs begin to be rolled into qualified plans.

A Word about Liability of Trustees, Custodians, Other Advisors

As mentioned previously, most PLRs that address “nondesignated” spouse beneficiaries involve situations where the beneficiary was the estate of the decedent or perhaps a trust. In most of those situations, the IRA assets never left the IRA account and consequently the 60-day rule for monies to be rolled over was not an issue. The trust or estate would not have paid the income tax because the income would have been passed on to the spouse as the recipient of the funds. It seems likely that in the event a nonspouse received a taxable IRA distribution, the 60-day period may have elapsed by the time the IRA monies are awarded to the spouse by way of the elective share. Furthermore, there appear to be no PLRs addressing the rollover of IRA assets by a spouse when someone else has already been taxed on those assets. The burning question this presents for IRA trustees and custodians is whether there should be a waiting period imposed on IRA distributions to nonspouse beneficiaries when there is a surviving spouse and the potential exists for an elective share challenge. IRA trustees and custodians are protected by the elective share statute under the definition of a third party or payor for actions taken in good faith based on the governing document.16 Therefore, it seems highly unlikely that many institutions would make the business decision to delay payment to designated beneficiaries and risk invoking the wrath of those awaiting distribution. That being said, the probability of an income tax fiasco seems infinitely greater.

And what about the IRA monies being deferred while waiting for an ownership decision? Upon death of the IRA owner, investment direction is normally taken from the beneficiary. In the case of multiple individual beneficiaries, the IRA would be divided as soon as possible after the IRA owner’s death, taking into account differing investment objectives and risk tolerances among beneficiaries. Is it possible that the financial industry may now have to be concerned about the surviving spouse’s investment objective? We are all held to the prudent investor standard but we take investment direction from IRA owners or beneficiaries as to objective, directed trades or holdings.

It will be extremely important for all financial, tax, and legal advisors involved in the family estate plan to be aware of the possible pitfalls involved in the manner the IRA assets might be handled. The elective share statute gives protection to a third-party payor against action by the surviving spouse, but does not cover possible legal action taken by the nonspouse beneficiaries in the event of election against their share of the IRA. Likewise, it will not exempt a tax advisor or attorney from possible charges of malpractice from the surviving spouse if there are disastrous tax results due to inadequate planning or advice.

Possible Practice Suggestions

There are no clear answers to anything discussed here other than to alert clients that IRAs will be included in the elective share going forward. For legal practitioners, it seems that the best way to be prepared is to have a good working knowledge of the character of the client’s assets prior to their death. This has always been important, particularly with IRAs, because oftentimes sophisticated estate plans fail because the drafting attorney was unaware that the primary asset of the client was an IRA.

One possible tactic might be to structure the IRA in such a way that the nonspouse beneficiaries could disclaim in favor of the spouse in the event of a challenge. This solves the “designated beneficiary” dilemma but would likely prove most unpopular with clients. Another possibility might be to name a trust for the benefit of the nonspouse beneficiaries, including a provision within the document directing the trustee of the trust to distribute any amounts necessary to satisfy the elective share prior to December 31 of the year after the IRA owner’s date of death. These monies could be placed in a separate IRA for the elective share trust that could be construed as a separate designated beneficiary. IRA custodians and trustees might consider requiring a “hold harmless” letter to be signed by any nonspouse beneficiaries that insist on distribution prior to the deadline for an elective share challenge. This would advise the beneficiary that an elective share challenge is possible and that they are withdrawing the money with eyes wide open, aware that there may be adverse tax consequences down the road. Finally, attorneys and financial institutions should be aware that the potential for a conflict of interest exists when the same financial institution is serving as personal representative and trustee or custodian of the IRA.

Conclusion

There are apparently no easy answers to any of these issues. Those of us within the trust and private client services industry are held to a higher standard not by the elective share statute but by our clients, who depend on us to look out for their best interests. This duty extends to the beneficiaries of those clients. It is up to all practitioners in the area of IRA administration and retirement planning to be aware of these potential problems and to stay as well-informed as possible. At a minimum, it seems inevitable that trustees and attorneys will need to advise nonspouse beneficiaries of the possibility of an elective share challenge whenever there are IRA assets. This might potentially include the extra precaution of having waivers or hold harmless agreements signed by the nonspouse beneficiaries prior to distribution in lieu of a waiting period. Eventually, the IRS will decide the issues of tax deferral and the Florida courts will decide the issues of how and whether the contributions are collected. Ultimately, our clients look to us for tax and estate planning advice, and it is our responsibility to do what is within our power to help our clients avoid costly mistakes.

1 Fla. Stat. §732.2075(1), (2).
2 The new proposed and final regulations are included in §1.401(a)(9)-0 §1.401(a)(9)-8; §1.403(b)-2; §1.408-8; and §54.4974-2.
3 Prop. Reg. §1.401(a)(9)-4, A-3 (b) and §1.401(a)(9)-5, A-5(c)(3).
4 Fla. Stat. §§732.2135(1) and (2).
5 Fla. Stat. §222.21(2)(a).
6 Fla. Stat. §222.21(2)(b).
7 N.Y. C.L.S. E.P.T.L. §5-1.1.26.
8 Supreme Court of Florida, Amendments to Florida Probate Rules, October 11, 2001, No. SC01-1859.
9 Final Reg. §1.401(a)(9)-4, Q & A-4.
10 Fla. Stat. §§732.2135(1) and (2).
11 For example, see PLRs 200052040, 200027061, 9835005, 9710034, 9623064, 9615043, 9609052, 9524020,9247026, and 8838075.
12 Fla. Stat. §732.2045(1)(c).
13 Reg. §1.401(a)-20, Q&A 17.
14 ERISA §205(c)(2)(A)-(iii).
15 New Fla. Stat. §732.702.
16 Fla. Stat. §732.2115.

The Top 5 Things Practitioners need to know about IRA’s Now; A Discussion of State Law, Case Law and other Considerations

This article was originally published in August 2004 by Kristen M. Lynch for The Florida Bar Journal. The original article can be found here: source

Individual retirement accounts (IRAs) are most often thought of as tax-deferred accounts that the government conjured up in the 1980s to encourage Americans to save for retirement. With almost $10 trillion in tax-deferred retirement accounts, $2.5 trillion of which is estimated to be held in IRAs, they have become an estate and tax planning force to be reckoned with.1 According to the Employee Benefits Research Institute, over 90 percent of all households in America have some sort of financial account, and of those households surveyed, retirement accounts were second in popularity only to transactional accounts such as checking and savings accounts.2 It is important to recognize the significance of these accounts and perhaps examine some of the nuances that prevent them from being just another product of the Internal Revenue Code, since it is likely under current tax law that a generous portion of the approximate $7.5 trillion that are in non-IRA retirement accounts will eventually be rolled into IRAs at some point in the future.

It is also important to recognize that every state has enacted laws that touch the world of IRA administration, that must be considered together with case law that sometimes seems to have little to do with statutes or the Internal Revenue Code. Additionally, each IRA trustee and custodian may also limit the options available to the IRA owner or beneficiary by contract. Sometimes the interaction of all of these elements can have a surprising impact on the ultimate disposition of these accounts. The focus of this article is to raise awareness of some of these elements and point out the pitfalls they present to the unwary.

Basic Goals and Challenges of Planning with IRAs

It is imperative to understand the basic rules and goals of IRAs before discussing their nuances. IRAs have always presented special estate planning challenges due to ownership restrictions. An IRA owner cannot give the IRA away intact during his or her lifetime. This has traditionally made it difficult to properly plan for use of the unified credit because the IRA can only be used to equalize the taxable estates between spouses when the IRA owner dies. The Internal Revenue Service released new proposed Treasury regulations on January 12, 2001, and new final IRA regulations on April 16, 20023 (IRA rules), simplifying administration during the IRA owner’s lifetime and providing new postmortem planning opportunities. With these new opportunities come an equal number of new challenges.

One must be mindful that IRAs are not taxable until monies are distributed to a beneficiary, at which time the distribution is taxed as ordinary income at the beneficiary’s tax rate. The length of income tax deferral available depends on whether a beneficiary is named, and who is considered a “designated” beneficiary under the new IRA rules. This could be either an individual or a trust that is both valid under state law and is irrevocable by its own terms upon the IRA owner’s death. The beneficiary must be named on the beneficiary designation form to be considered “designated.” Under the new IRA rules, the post-death distribution period is based on the life expectancy of the designated beneficiary or beneficiaries (if there are separate shares) that remain as of September 30 of the year after the calendar year of the IRA owner’s death. With the best-laid plans, a nonspouse beneficiary can look forward to taking IRA distributions over his or her own life expectancy. If no beneficiary has been named, the estate is named, or if there are multiple beneficiaries and one is not an individual, the IRA will be deemed to have no designated beneficiary. Death of the IRA owner after the required beginning date (RBD) without a designated beneficiary will result in deferral based on the remaining single nonrecalculated life expectancy of the decedent.4 If the death occurred prior to the IRA owner’s RBD and there was no designated beneficiary, distribution must be made by December 31 of the calendar year containing the fifth anniversary of the decedent’s date of death. This certainly curtails the benefits of tax-deferred growth that might have otherwise been available.

Spouses receive special treatment under the tax code and are the only beneficiaries that can inherit IRAs or qualified plan assets and actually roll them over, or simply change the name on the account to their own. In an ideal world, having a spouse beneficiary can result in significant tax benefits because when a spouse rolls over assets, all future distribution dates revolve around the surviving spouse’s date of birth, rather than that of the deceased IRA owner. These assets are subject to an unlimited marital deduction for estate tax purposes but more importantly, if the surviving spouse is younger than the decedent, there will also be a substantial opportunity for deferral of income taxes.
Also contained in the preamble of the new final regulations under the heading “Explanation of Provisions” is the following:

The period between death and the beneficiary determination date is a period during which beneficiaries can be eliminated but not replaced with a beneficiary not designated under the plan as of the date of death. In order for an individual to be a designated beneficiary, any beneficiary must be designated under the plan or named by the employee as of the date of death.

This refers to the new postmortem planning opportunities that arise through the ability to disclaim, distribute, or divide the assets. A disclaimer of assets must be done in compliance with IRC §2518 as well as state statute, and must generally be done within nine months of the decedent’s date of death; this is not extended to the September 30 beneficiary determination deadline. Distribution must be made prior to September 30 to any beneficiary that is not a designated beneficiary in order to preserve the deferral options of the designated beneficiaries. Finally, accounts may be divided at any time after the IRA owner’s death but must be divided by the December 31 deadline in order to receive separate share treatment.

If the Internal Revenue Code were the only consideration in IRA planning, the new final rules would be simpler than the prior rules, and planning with these accounts would not present such a challenge. However, as you will see in the ensuing discussion, there are many issues unrelated to the Internal Revenue Code that can play an integral role in the outcome of the IRA. This article presents many of these issues for your consideration but will focus primarily on case law, statutory law and concerns for Florida residents and their advisors.

1) Be Aware of State Statutes Affecting IRAs

Most states have a number of statutes that impact IRAs and, while the following is not meant to be an exhaustive list of all relevant statutes, it is a starting point. It is important that practitioners are aware of the relevant statutory scheme when planning with IRAs.

The Elective Share: Florida’s new augmented elective share statute became effective on October 1, 2001. IRAs and qualified plans now fall under the second tier of the three-tier priority system imposed by statute.5 A surviving spouse who is unhappy with his or her share of the decedent’s estate can now elect 30 percent of the augmented estate, including IRAs. The window for filing for the elective share is the earlier of six months from receipt of notice of administration or two years from the date of death of the decedent.6 This date is significant in light of the September 30 deadline for IRA beneficiary determination. Furthermore, new proposed treasury regulations §1.401(a)(9)-4, A-1 specifically state that “the fact that an employee’s interest under the plan passes to a certain individual under applicable state law does not make that individual a designated beneficiary unless the individual is designated as a beneficiary under the plan.” It remains unclear under the new IRA rules whether a spouse who is not listed on the beneficiary form will be afforded the same leeway as in the past. Furthermore, it is possible that in the event of an elective share challenge, maximum income tax deferral could be lost not only for the surviving spouse but for the other designated beneficiaries on the account. This issue may be overcome with the use of disclaimers, valid prenuptial or postnuptial agreements or spousal waivers.

Guardianship Laws: Many practitioners welcome the opportunity to name a child or grandchild as beneficiary of an IRA because, when designated properly, this will maximize the deferral opportunity available. A grandchild who is age five at the time of the IRA owner’s death will have a life expectancy of approximately 78 years,7 which is a great planning opportunity; however, don’t overlook the fact that under F.S. §744.301(2), a natural guardian or parent may only manage or dispose of proceeds from an inheritance not exceeding $15,000. Currently, this would include IRAs if the amount of the IRA inherited exceeds $15,000. This can be overcome by the proper use of a trust for the minor.

Additionally, Florida guardianship law requires that if the IRA owner becomes incapacitated, the court may need to establish a guardianship. If the IRA owner is out of state but the IRA account is housed within the State of Florida, a foreign guardian may need to appoint a resident agent.8 This may be avoided with a properly drafted power of attorney.

Probate Law: IRAs are exempt from the claims of creditors pursuant to F.S. §222.21 and are not subject to probate unlessthe estate of the decedent is the beneficiary of the estate. When an estate is the IRA beneficiary, maximum tax deferral opportunities are lost. In a world where asset protection has become so important, protecting the exempt status of IRAs should be given utmost consideration. This can be avoided by designating a valid beneficiary, not only for IRA owners, but also beneficiaries of inherited IRAs on forms provided by the IRA trustee or custodian.

Uniform Principal and Income Act: F.S. §738.602 now clarifies how distributions from IRAs and qualified plans will be treated for purposes of trust accounting income. Planners must keep in mind that the distribution itself is still subject to income tax regardless of whether it is categorized as trust account income or principal, but the characterization of the distribution may determine whether it passes out to the beneficiary or is taxed within the trust at the higher trust tax rate.

Community Property Law: Florida is not a community property state, but many of our residents have moved here from community property states. There are currently nine states that offer community property status. These states are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Planners should consider and evaluate an IRA owner’s prior residence in any of the above states before naming someone other than the spouse as the IRA beneficiary.

State Estate and Income Tax: Although Florida does not have state income tax and will not even have a “pickup” or “sponge” death tax for much longer, many IRA owners within this state are subject to taxes in other states. It will be especially important, going forward, to be certain to take any potential state death tax liability into account when planning.

2) Be Aware of Case Law Regarding IRAs

IRAs are most often litigated within the context of three basic types of cases: divorce, bankruptcy, and estate settlement. The primary focus of this article is on tax and estate planning considerations; therefore, we will not address the bankruptcy issues as that could easily render enough material for a separate article. However, it is important to know what precedent exists within the divorce and estate settlement arenas.

Division in Divorce: F.S. §61.075 requires equitable distribution in the event of divorce. IRAs and qualified plan assets are considered to be marital assets to the extent that the assets were acquired or enhanced during the marriage. Qualified plans are divided by way of a qualified domestic relations order (QDRO); however, it is significant to note that for the division of an IRA to be a nontaxable event, the court must so order and the language of the order and/or property settlement must clearly state that the monies being distributed from the IRA in the name of spouse A are to be rolled or transferred into an IRA in the name of spouse B. This is critical because, if the court order only states “spouse A is to pay spouse B $$$ funds from spouse A’s IRA,” spouse A will be liable for the income tax on the money and potentially any penalties if spouse A is not 59 ½ years of age yet, and spouse B may lose tax-deferred growth.

Disposition of IRA after Divorce: Another common mistake resulting in a proliferation of case law is failure to change the beneficiary of the IRA to reflect the divorce of the parties. The leading case in regard to this issue is Cooper v. Muccitelli, 661 So. 2d 52 (Fla. 2d DCA 1995), a case involving life insurance proceeds. The spouses had divorced and then the husband died without changing his beneficiary designation to remove his former spouse. The appellate court certified a question to the Florida Supreme Court regarding the court’s holding that, without specific reference in a property settlement to life insurance proceeds, the beneficiary of the proceeds is determined by looking only to the insurance contract. The Florida Supreme Court examined the dissolution terms as well as the insurance documentation. It determined that the husband was free to name anyone he liked as beneficiary of the insurance policy and that the instructions were clear as to how to accomplish a change. He did not take any steps to effectuate a change prior to his death and, therefore, the former spouse remained as the beneficiary. The court said, “The analysis that the general language in the separation agreement trumps the specific language in the policy would place the insurance carrier in an impossible position—the carrier could never be certain whom to pay in such a situation without going to court, in spite of what the policy said or how clearly it was worded.”9

The parties may avoid this situation with specific language in the separation agreement10 or by having the IRA owner execute a new beneficiary designation. The Florida statutes concerning revocable trusts and wills in light of divorce11 do not govern any account whose disposition is determined by a beneficiary designation and therefore will not automatically cause the surviving former spouse to be treated as having predeceased the decedent.

Most states follow the same logic as the state of Florida.12 One case of particular interest is PaineWebber, Inc. v. East, 768 A.2d 1029 (Md. 2001). This case concerned a former wife who brought suit against the former husband’s estate, the trustee of the former husband’s IRA, and the surviving spouse of the former husband to recover IRA proceeds as his named beneficiary. The interesting twist in this case is that the PaineWebber IRA agreement had been updated, as is required by the IRS when there are changes in the law, and the new agreement left the beneficiary designation blank. The only signed form designating a beneficiary was a prior agreement naming the former wife. The Maryland Supreme Court chose to award the IRA to the former spouse as they found there was no evidence to show that the prior beneficiary designation had been revoked. Though extreme, this opinion illustrates the importance of properly designating spousal beneficiaries.

Estate Settlement: Estates that include IRAs as assets have the same types of issues as estates that do not include IRAs. There are often disputes over who is entitled to the IRA. The only thing that makes IRAs different is that, usually, the beneficiary designation form will control over a will. There are many cases in Florida relating to IRAs and estate settlement, some examples of which follow below.

Adoption and Estate Settlement: In Leonard v. Crocker, 661 So. 2d 1244 (Fla. 3d DCA 1995), the personal representative of the estate brought suit seeking to recover proceeds of an IRA, alleging that the designation of the decedent’s child as beneficiary lapsed upon the child’s subsequent adoption. The circuit court in Dade County awarded the account proceeds to the subsequently adopted child. The personal representative appealed. The district court of appeal held that the designation that identified the IRA beneficiary by birth date and Social Security number did not lapse upon the beneficiary’s subsequent adoption and name change.

Doctrine of Cy Pres and Estate Settlement: It is beneficial to name a charity as beneficiary of an IRA, as the charity is the only entity that can take receipt of IRA assets and not pay income tax, and the estate will receive a deduction for the full amount of the charitable gift. However, sometimes even charitable bequests have problems. Alzheimer’s Case, 747 N.E.2d 843 (Ohio 1st Dist. 2000), is an Ohio case in which the decedent left one fifth of his IRA to “Alzheimer’s Disease Research.” The custodian of the IRA filed a complaint with the probate court seeking a declaratory judgment. The decedent had previously gifted monies to several different Alzheimer’s organizations locally. Applying the cy pres doctrine, which allows an equitable substitution if the original charitable purpose has become impossible, inexpedient, or impracticable to fulfill, the court ordered that each of three charities that were a party to the action receive one third of the monies designated for “Alzheimer’s Disease Research.”

Will versus Intent versus Beneficiary Designation and Estate Settlement: There are many cases, both in Florida and across the country, arising from conflicting testamentary provisions. Generally, IRAs are treated as pay-on-death accounts and are governed by the beneficiary designation rather than by will or probate.13Most cases hinge on whether there were specific steps required by the trustee or custodian to effect a change of beneficiary, whether they were followed, and whether there was intent and substantial compliance.14 In the case of In re Estate of Golas, 751 A.2d 229 (Pa. Super. 2000),15 the decedent was a cancer patient and made numerous attempts to change his beneficiary designation to reflect his sister prior to his death. He died while waiting for the change of beneficiary form, but had made his intent clear to his attorney as well as two brokers. The court found that there was sufficient intent and substantial compliance on the part of the decedent and awarded the IRA to the sister. It is unclear what impact this outcome may have had on the tax deferral retained by the IRA.

Surviving Spouses and Estate Settlement: Sometimes spouses are surprised to learn that they are not the beneficiaries of the IRA upon the death of the IRA owner, and there is no duty to the spouse to inform them if the IRA owner makes a change.16 There are no reported cases involving IRAs and Florida’s elective share as of yet, but there are numerous cases elsewhere dealing with surviving spouses and contests over IRAs. There are several cases involving IRAs and elective share issues in other states. In Briggs v. Hemstreet-Briggs, 701 N.Y.S.2d 178 (N.Y.A.D. 3 Dept. 2000),17 the petitioning spouse’s position is counter-intuitive because the spouse inherited several IRAs from her husband and failed to disclose them to the court to be included in the calculation of her elective share. The court punished the surviving spouse for her lack of candor by awarding the IRA to the estate. While this appears to be a just result, once again it is unclear what tax consequences this decision may have had in regard to the tax-deferred status of the IRA.

Miscellaneous Issues and Estate Settlement: There are too many categories to be able to include all types of settlement cases but here are some points of interest. In re Estate of Branovacki 723 N.Y.S. 2d 575 (N.Y.A.D. 4 Dept. 2000), is a New York case dealing with undue influence regarding a change of beneficiary. Johnston v. Estate of Wheeler, 245 A.2d 345 (D.D.C. 2000), is a District of Columbia case where the court determined that a rollover of qualified plan assets into an IRA by the decedent prior to death did not constitute ademption under the probate code. There are many cases on state death tax and IRAs,18 as well as cases on apportionment of estate taxes between probate and nonprobate assets.19 Finally, there are a growing number of malpractice and third party beneficiary cases.20

3) Trusts May Be Worth the Trouble

There are many good reasons for naming a trust as an IRA beneficiary; avoidance of guardianship, use of the credit shelter, and control of the disposition of assets after the IRA owner’s death. The trick with using a trust in this fashion is to be able to do so without sacrificing tax deferral opportunities. To preserve tax deferral options, it is important that the trust qualify for “look through” treatment, which means the life expectancy of the oldest beneficiary of the trust can be used for distribution purposes.21 In order to use separate life expectancies for separate subtrusts and qualify for separate share treatment under the final IRA rules, two requirements must be met: 1) the interests of the beneficiaries must be expressed as fractional or percentage interests as of the date of death of the IRA owner; and 2) separate accounts must be established by December 31 of the year after the IRA owner’s death. Without separate share treatment, the trust will be limited to using the life expectancy of the oldest beneficiary. This may be a trap for the unwary if the goal was to pay the IRA assets to separate subtrusts over the underlying beneficiary’s life expectancy.

The IRS has issued conflicting private letter rulings (PLRs) on the use of trusts. Although PLRs cannot be used as precedent unless your client has the exact same facts and circumstances as the taxpayer in the PLR,22 they are a helpful tool in the interpretation of IRS issues. The same month that the final regulations were issued, so was PLR 200234074. In this PLR, the IRA was payable to a trust. The trust was divided into two subtrusts. Subtrust A was payable to the surviving spouse outright. Subtrust B provided for lifetime income to the surviving spouse, with the remainder paid outright and equally to three beneficiaries (the IRA owner’s children). The trustee of the trust then split the IRA into four separate inherited IRAs (one for subtrust A and three for the children). At the time, the IRS ruled that each child could use his or her own life expectancy, as subtrust B was viewed as a “look-through” trust. The final regulations followed this PLR.

The next series of PLRs on this issue resulted in completely different rulings. The facts set forth in PLRs 200317041, 200317043, and 200317044 are eerily similar to those in PLR 200234074. In all three cases, the IRA was payable to a trust upon the death of the IRA owner. In each case, that trust was payable equally to the owner’s children, with no discretion in regard to the amount of the share each child would receive. In all three cases the IRS denied separate share treatment. The IRS position seems to hinge on a new sentence in the final regulations in Treas. Reg. §1.401(a) (9)-4, A-5(c). It reads, in part, “[T]he separate account rules under A-2 of §1.401(a) (9)-8 are not available to beneficiaries of a trust with respect to the trust’s interest in the employee’s benefit.” In effect, the new position of the IRS is to “look no further than the beneficiary form,” much like the policy has been on estates. It is clear from the regulations that a trust is considered to be a designated beneficiary if it meets the requirements we have already discussed earlier in this article. The IRS’s new position appears to be that, as a designated beneficiary, the trust has a life expectancy of its own and that life expectancy is based on the life expectancy of the oldest beneficiary of the trust, regardless of any subtrusts created within the trust.

Although this interpretation is troubling and certainly not what the professional community was lead to believe would be the IRS’s position in the final regulations, it is not a complete disaster; however, it does require some creative drafting. First, be sure to designate subtrusts specifically on the beneficiary form. Do not make the IRA payable to the master trust, but, rather, list specific subtrusts and the percentage or fraction that each subtrust will inherit. Second, plan for contingencies and leave an exit strategy. If the plan is to leave the IRA to a trust with income for life to the surviving spouse and then to the children, specify, “If my spouse survives me, I designate the John Smith Trust as beneficiary of my IRA. If my spouse does not survive me, then I designate my children as beneficiaries of my IRA in equal shares” on the beneficiary form. Third, allow for disclaimers. The specific endorsement of the use of qualified disclaimers to determine designated beneficiaries by the IRS is a gift of sorts. Fourth, designate as many layers of contingent beneficiaries as possible. doing so, it may be possible to update an outdated beneficiary form postmortem by use of qualified disclaimers, and still achieve the desired result. Finally, be aware of the contingent beneficiaries of any trust named on the beneficiary designation. A result similar to that in PLR 200252097 should be avoided. The trust in question contained language that made it possible for someone older than the primary beneficiary to ultimately inherit the IRA proceeds. This being the case, the IRS ruled that the older contingent beneficiary’s life expectancy had to be taken into account. To avoid this potential pitfall until the IRS clarifies its position, be sure that the benefits of any subtrust named directly as an IRA beneficiary will not revert to someone older than the beneficiary whose life expectancy you want to be able to use, or that the trust will be treated as a conduit trust, which requires current distribution of RMDs to the beneficiary.

4) Estate Beneficiaries Are Not the End of the World

As discussed earlier, estates are not considered designated beneficiaries. Even so, there is good news within the final regulations. Under the new rules, an estate may use the remaining single nonrecalculated life expectancy of the IRA owner if the IRA owner died after attaining age 70 ½. The old rule was that the IRA had to be distributed by December 31 of the year after the IRA owner’s death. This new rule means that even if some disaster occurs where disclaimers and distributions will not work to fix an undesirable beneficiary designation (or perhaps no designation at all), there is still some time available for deferral. For an IRA owner age 70 at the time of death, this could mean income tax deferral for the estate of 16 or 17 years, a burdensome period for the maintenance of an open estate. Be aware that PLR 200013041 concluded that when the trust that was the beneficiary of the IRA terminated, the trust could distribute shares of the IRA to the subsequent beneficiaries and there would be no change in the tax status of these accounts. The new accounts were funded as a result of the trustee assigning the interests in the IRA to the subsequent beneficiaries and trustee to trustee transfers being executed. The IRAs were set up in the name of the decedent for benefit of (FBO) the trust beneficiaries. There was no additional deferral or acceleration of tax liability but rather the remaining nonrecalculated life expectancy of the IRA owner. Likewise, PLR 200234019 reflects the same result with regard to estates. Also, be aware that although the IRS will most likely allow these transfers without any tax implications, it is sometimes difficult to find an IRA trustee or custodian who is willing to divide the IRA and allow continued deferral.

5) Read the IRA Agreement

Despite their peculiarities, IRAs are, in their simplest form, trusts.23 Property is required to be held by one party for the benefit of another. More than that, an IRA agreement is also a contract with the financial institution that is providing the custodial or trustee relationship. Many times IRA owners do not bother to read the fine print on these agreements and may be surprised by the terms to which they have agreed.24

All IRA agreements must be approved by the IRS prior to use to ensure that the arrangement will qualify as an IRA under the Internal Revenue Code. Beyond the basic language that is required, custodians and trustees have the right to include language for their own business purposes. Such language will often include a clause mandating arbitration or mediation of claims. Often, these agreements will also include default provisions in regard to the disposition of the IRA upon the owner’s death. It is important to know whether the document provides for distributions between beneficiaries to be “per stirpes” or “per capita.” Many of the older documents had a default provision of “per capita,” meaning that if the IRA owner died and left funds to three children, and one of the three children predeceased the IRA owner, the funds would be payable to the surviving two children rather than to the heirs of the deceased child. This is not usually the desired result.

Many older documents also have a default regarding who the IRA is payable to in the event that no beneficiary is named. Most financial institutions have a default of the IRA owner’s estate, but some have chosen to make the default the IRA owner’s surviving spouse. Some institutions will allow a beneficiary of an inherited IRA to name their own beneficiaries, as permitted by the IRS. Others do not allow this, which results in the inherited IRA being payable to the estate of the beneficiary in the event that the beneficiary deceases prior to complete payout of the account. As a result, an otherwise nonprobate asset would be subject to probate. Finally, some documents actually limit the payout options available to estates and require that, if the estate is the beneficiary, the account must be paid out within one year.

It is imperative for the IRA owner and their professional team to periodically review the IRA agreements that govern their accounts. Agreements must be amended periodically by the institution to comply with changes in the Internal Revenue Code. Often when these amendments are made, these new default provisions are incorporated. It is equally important to keep copies of all beneficiary designations. In a financial world that is trying to go paperless, it is common for original beneficiary forms to be scanned or microfiched, and sometimes the copies are illegible and institutions are unable to locate the originals. It is imperative that copies of these forms be kept with other important estate planning documents, because a beneficiary designation holds more weight in Florida courts than a will.

Conclusion

It is up to all practitioners in the area of IRA administration, estate planning, and retirement planning to be aware of all of these idiosyncrasies and to stay as well-informed as possible. Awareness of the legal and business environment in which IRAs exist is essential to help our clients avoid costly mistakes and unexpected outcomes.

1 www.ebri.org/facts/1203fact.pdf.
2 www.ebri.org/facts/0403fact.pdf.
3 The new proposed and final treasury regulations are included in §1.401(a)(9)-0; §1.401(a)(9)-8; §1.403(b)-2; §1.408-8; and §54.4974-2.
4 Prop. Treas. Reg. §1.401(a)(9)-4, A-3 (b) and Treas. Reg. §1.401(a)(9)-5, A-5(c)(3).
5 Fla. Stat. §732.2075(1), (2).
6 Fla. Stat. §732.2135(1) & (2).
7 Department of the Treasury, Internal Revenue Service, Publication 590, Appendix C Life Expectancy Tables; Table 1 (Single Life Expectancy) (For Use by Beneficiaries).
8 Fla. Stat. §744.307(2).
9 Cooper v. Muccitelli, 682 So. 2d 77, 79 (Fla. 1996).
10 See also Vaughan v. Vaughan,741 So. 2d 1221 (Fla. 2d D.C.A. 1999); In re Estate of Dellinger, 760 So. 2d 1016 (Fla. 4th D.C.A. 2000); Luszcz v. Lavoie, 787 So. 2d 245 (Fla. 2d D.C.A. 2001).
11 Fla. Stat. §§737.106 and 732.507.
12 See also Schultz v. Schultz, 591 N.W. 2d 212 (Iowa 1999); Pinkard v. Confederation Life Insurance Company, 647 N.W. 2d 85 (Neb. 2002).
13 31 Am. Jur. 2d Executors and Administrators §502 (1989).
14 See Goter v. Brown, 682 So. 2d 155 (Fla. 4th D.C.A. 1996); Bielat v. Bielat, 721 N.E. 2d 28 (Ohio 2000); In re Estate of McIntosh, 733 A. 2d 649 (N.H. 2001); In re Estate of Gloege, 649 N.W. 2d 468 (Minn. App. 2002).
15 See also In re Estate of McIntosh, 773 A. 2d 649 (N.H., 2001); In re Estate of Eastman, 760 A.2d 16 (Pa. Super.
2000).
16 Anton v. Merrill Lynch, 36 S.W. 3d 251 (Tex. App.-Austin, 2001).
17 See also Caine v. Freier, 564 S.E. 2d 122 (Va. 2002); McInnis v. McInnis, 560 S.E. 2d 632 (S.C. App. 2002).
18 See In re Estate of Roberts, 762 N.E. 2d 1001(Ohio 2002); In re Estate of Rosenberg, 2001 WL 1155804 (Ohio App. 6 Dist. 2001); Carlin v. Director, New Jersey Div. of Taxation, 19 N.J. Tax 545 (N.J. Tax 2001).
19 Peterson v. Mayse, 993 S.W.2d 217 (Tex. App.-Tyler 1999).
20 See Simonelli v. Chiarolanza, 810 A.2d 604 (N.J. Super. A.D. 2002); Holtz v. J.J.B. Hilliard W.L.Lyons, Inc., 185 F. 3d 731 (IN. C.A. 7 1999); Johnson v. Wiegers, 46 P.3d 563 (Kan. App. 2002); Powers v. Hayes, 776 A.2d 374 (Vt. 2001); Lavitt v. Meisler, WL 21771728 (Conn. Super. 2003).
21 Treas. Reg. §§1.401(a)(9)-4 A-5 and 1.401(a)(9)-5 A-7.
22 Treas. Reg. §601.201(1)(1).
23 McCarty v. State Bank of Fredonia, 795 P.2d 940 (Kan. App. 1990).
24 See Paszamant v. Retirement Accounts, Inc., 776 So. 2d 1049 (Fla. 5th D.C.A. 2001) (where court held a custodian has no duty to monitor investments in a self-directed IRA); and Smith Barney, Inc. v. Henry, 775 So. 2d 772 (Miss. 2001) (where court held that IRA beneficiary was bound to arbitration pursuant to IRA agreement signed by deceased IRA owner).

When Good IRA’s Go Bad: Common Pre-and-Post Mortem IRA problems with Uncommonly Bad Results

This article was originally published in December 2005 by Kristen M. Lynch for The Florida Bar Journal. The original article can be found here: source

Individual Retirement Accounts are tax-deferred accounts that, if handled properly, can be an effective vehicle for retirement and can be passed on to a surviving spouse or other heirs while retaining the deferral of income tax. The new IRA rules enacted a few years ago provide post-mortem planning opportunities in an area that previously had little flexibility. To take full advantage of these new opportunities, IRA owners and their professional consultants must pay special attention to the planning details. A lack of proper attention to details can have near disastrous results. The purpose of this article is to point out some potential perils and pitfalls.

IRA Planning in General


The Internal Revenue Service released new proposed Treasury regulations on January 12, 2001, and new final IRA regulations on April 16, 2002.1 These rules simplify administration during the IRA owner’s lifetime and provide new post-mortem planning opportunities. The basic rules provide for required minimum distributions (RMDs) to the IRA owner commencing upon the April 1 immediately following the calendar year in which the IRA owner attained age 70 ½ (hereafter referred to as the required beginning date or RBD), or to the beneficiaries upon the death of the IRA owner. IRA monies are not subject to income tax until distributed to the IRA owner, or after the death of the IRA owner, to the beneficiaries. Distributions are taxed at the recipient’s income tax rate.

The amount of deferral available depends on whether a beneficiary is named, and whether that beneficiary is considered a “designated” beneficiary. Under the new IRA rules, this means a beneficiary must either be an individual or certain trusts. To qualify, a trust must be valid under state law and become irrevocable by its own terms upon the IRA owner’s death. In addition, the beneficiary must be listed on the beneficiary designation form to be considered “designated.” Estates and charities are not considered “designated” beneficiaries in this context. The new post-death distribution period is based on the life expectancy of the designated beneficiary or beneficiaries (if there are separate shares) that remain as of September 30 of the year after the calendar year of the IRA owner’s death. This could be substantial in the case of a young beneficiary. If there is no designated beneficiary, the distribution period is significantly shorter.

Spouses are normally the preferred choice to be designated as the primary IRA beneficiary. Spouses are the only beneficiaries allowed to roll IRAs over into their own name. However, this may be undesirable if it is a multiple marriage; if there are family or financial issues; if the surviving spouse cannot manage money; if the surviving spouse is susceptible to pressure from children; or the surviving spouse has a different dispositive intent than the decedent spouse. Spouses also have the ability to leave the IRA titled in the name of the decedent spouse and take distributions based on the remaining life expectancy of the decedent, but normally this is only used when the surviving spouse is significantly older than the decedent spouse because this severely limits deferral opportunities for the ultimate beneficiaries.

Properly drafted trusts can be used to ensure that the IRA owner’s dispositive intent is followed. For example, a marital trust as primary IRA beneficiary in a second marriage situation would allow IRA distributions to pass through the trust to the surviving spouse for life, with the remaining balance paid to children from the first marriage after the surviving spouse’s death. The downside to such a plan is that the spouse will be deemed the oldest beneficiary of the trust and, hence, the measuring life for RMD purposes; but the surviving spouse will have the benefit of income from the IRA for life without the ability to change the ultimate beneficiaries.

The new IRA rules also specifically provide for three new post-mortem planning tools: disclaimer, distribution, or division. To avoid a taxable gift, disclaimers must be done in compliance with IRC §2518 as well as state statutes. Generally, this is within nine months of the decedent’s date of death. This time deadline is not extended to the September 30 beneficiary determination deadline. A complete distribution to a beneficiary prior to such September 30 is disregarded for purposes of determining who will be treated as designated beneficiaries and will preserve the deferral options for the remaining designated beneficiaries. Finally, accounts may be divided at any time after the IRA owner’s death but must be divided by December 31 of the year following the year containing the decedent’s date of death in order to be eligible for separate share treatment.

The Best Laid Plans


The IRA will be deemed to have no designated beneficiary if an otherwise designated beneficiary predeceases the IRA owner and there is no contingent beneficiary named; or the estate is named, or if there are multiple beneficiaries and one is not an individual; or there is some other breakdown in the planning process. For an IRA owner that dies after attaining RMD status, all of the above would result in a deferral limited to the remaining single nonrecalculated life expectancy of the decedent.2 If the IRA owner dies prior to reaching RMD status and there is no designated beneficiary, distribution must be made by December 31 of the calendar year containing the fifth anniversary of the decedent’s date of death. The lack of a designated beneficiary (other than a charity) normally indicates a breakdown in the planning process, especially in light of the new rules. This article presents several common situations to avoid that illustrate a breakdown in the planning process or unanticipated post-mortem complications.

The Ideal Family and the Perfect Plan


In an ideal pre-mortem planning situation, the IRA owner is in a first marriage; all of the children are of common descent and financially responsible with no drug, alcohol, or looming divorce issues; and the surviving spouse is financially knowledgeable and responsible, and will survive long enough to roll the IRA over. Few families meet these criteria. However, in such an ideal situation, the IRA owner would name the surviving spouse as the primary beneficiary and the children as contingent beneficiaries. If the beneficiary spouse survives the IRA owner, the surviving spouse would then be able to roll over the IRA and designate the children as primary beneficiaries. Upon the death of the surviving spouse, the children will be treated as designated beneficiaries and will be eligible to take distributions from the IRA based upon their individual life expectancies. In this scenario, even if the beneficiary spouse predeceases the IRA owner, the children are designated properly as the contingent beneficiaries and will be able to take distributions based upon their individual life expectancies. All of this presumes, of course, that all RMDs are made timely and that all relevant deadlines are complied with.

The Case of the Untimely Demise


What would happen if the beneficiary survives the IRA owner but not long enough to take any action? Presumably, the beneficiary survived long enough to inherit the IRA unless the IRA agreement contains other provisions. Pursuant to the IRA rules, the deceased beneficiary is the designated beneficiary unless the estate of the deceased beneficiary disclaims the interest in the IRA. Absent some action on the part of the deceased beneficiary’s personal representative to disclaim, RMDs made from the IRA of the deceased owner will be payable to the estate of the deceased beneficiary, and will be based upon the single nonrecalculated life expectancy of the deceased beneficiary. The IRA will become a probate asset of the deceased beneficiary because it is payable to that estate. In a spousal situation this is not fatal to the IRA, but there will be no additional deferral available to the children This has the potential to complicate an otherwise well-executed estate plan, because the ultimate IRA recipients will be determined by the deceased spouse beneficiary’s will, or if none, by the intestacy laws of the state of residence. There may be additional concerns if there is a deceased nonspouse beneficiary involved. As is the case with a deceased spouse beneficiary, the will should determine the ultimate recipient of the proceeds and, absent a will, the applicable state intestacy statute will apply. Through intestacy, the spouse of the deceased beneficiary, a half-blood sibling, adopted child, or other unanticipated heir might inherit as opposed to keeping the IRA in the chain of lineal descent of the deceased IRA owner.

In most instances, these unintended results can be completely avoided with a combination of proper estate planning and proactive post-mortem planning. First, beneficiary designations should always be layered to provide maximum flexibility if circumstances change. Second, surviving spouse beneficiaries should roll over an inherited IRA or name their own beneficiaries as soon as possible after the death of the IRA owner. Third, nonspouse beneficiaries should also designate their own beneficiaries to avoid the possibility that an inherited IRA could pass through or create a probate estate upon the beneficiary’s death. Finally, a timely disclaimer of the IRA interest by the personal representative of the deceased beneficiary might be able to correct the problem. If a situation arises where an IRA is payable to an estate, be aware that PLR 200234019 concluded that the personal representative of an estate could distribute shares of the IRA in kind to the subsequent beneficiaries of the estate without changing the tax status of these accounts. The personal representative assigned the interests in the IRA to the subsequent beneficiaries, and trustee to trustee transfers were done. The IRAs were established in the name of the decedent for the benefit of (FBO) the estate beneficiaries. There was no additional deferral or acceleration of tax liability but, rather, the ability to distribute over the remaining nonrecalculated life expectancy of the IRA owner. Be aware that although the IRS allowed it, not all IRA trustees or custodians (providers) are willing to divide the IRA or allow continued deferral, and contractually limit this option.

The Case of the Disappearing Beneficiary Designation


One common situation that arises is when the original beneficiary designation has been misplaced. Many times, for investment reasons unrelated to dispositive intent, IRAs are moved by the IRA owner, either within the same institution or between institutions. Accounts may be combined for individual asset management or, conversely, divided into separate accounts for use of mutual funds, hedge funds, or similar investments. It is important not to disturb any beneficiary planning that has been put into place when an IRA owner moves or transfers an account for nondispositive reasons.

In the event that the original beneficiary designation cannot be found, the IRA agreement normally provides for a default beneficiary. The majority of agreements provide that the default beneficiary is the IRA owner’s estate. As such, the IRA will be treated as though there is no designated beneficiary and tax deferral will depend upon the age of the IRA owner at death. As discussed earlier, if the IRA owner died testate, the recipients will be determined by will; if intestate, then by statute. If there is a surviving spouse, there may be an elective share issue. In Florida, IRAs and qualified plans now fall under the second tier of the priority system imposed by statute to fund payment of the elective share.3 A surviving spouse potentially has the right to elect 30 percent of the augmented estate, including IRAs. The timing for filing for the elective share is critical in light of the September 30 deadline for IRA beneficiary determination.

In the alternative, some institutions provide a default presuming the surviving spouse to be the beneficiary, absent a valid beneficiary designation. This can be a positive result in a first marriage or other uncomplicated situation; however, if there is a pre-nuptial or post-nuptial agreement, this may open the door for a spouse to argue that the IRA was intended to be left to them despite any prior agreements. It is important to note that there is no federal or state law requirement that an IRA be left to a spouse. A spouse has no ownership rights to an IRA unless the IRA owner and spouse have resided in a community property state. Even if the spouse is originally designated as a beneficiary, there is no duty on the part of the IRA owner or the IRA provider to inform the spouse if the IRA owner changes the beneficiary designation.4

The Case of Conflicting Intent


Often there are conflicting testamentary provisions. There is prolific case law, in Florida and across the country, addressing conflicting testamentary provisions. In Florida, IRAs are not probate assets unless left to the estate intentionally or by default as discussed previously. IRAs are governed by the beneficiary designation rather than by will or probate.5 Most cases hinge upon whether there were specific steps required by the IRA provider to effect a change of beneficiary, whether they were followed, and whether there was intent and substantial compliance.It is common for the IRA provider to require that the change be made in writing, in a form prescribed by such provider, and delivered to and accepted by the provider. Failure to comply with the requirements of the IRA provider may result in the beneficiary designation being rendered ineffective. At the time of this writing there is only one reported case specifically dealing with the issues of intent and substantial compliance without a written beneficiary designation. In re Estate of Golas, 751 A.2d 229 (Pa. Super. 2000),7the decedent was a cancer patient and made numerous attempts to change his beneficiary designation to name his sister prior to his death. He repeatedly made his intent clear to his attorney as well as two brokers, but died while waiting for the change of beneficiary form. The court found sufficient intent and substantial compliance on the part of the decedent and awarded the IRA to the sister. It is not known how the IRS would view such a beneficiary designation for purposes of deferring distributions.

The Case of the Diminished Distribution


Trusts are often used as an effective and necessary estate planning tool in IRA planning. Sometimes a trust is used for estate planning advantages and sometimes for reasons of necessity. For example, if there are minor children or grandchildren, a trust may be necessary to avoid the cost, expense, and hassle of a guardianship. Other reasons could include heirs with special needs issues, spendthrift issues, substance abuse issues, or just for the purpose of controlling the ultimate disposition of the IRA owner’s assets. Trusts can also be used to layer the beneficiary designation in an attempt to make full use of a credit shelter amount, or to keep money in a marital trust for a second spouse. There are several requirements that must be met in order to obtain maximum income tax deferral.To preserve income tax deferral options, it is important that the trust qualify for “look through” treatment, so that the life expectancy of the oldest beneficiary of the trust can be used for distribution purposes.Two requirements must be met in order to use separate life expectancies for separate sub-trusts and qualify for separate share treatment under the final IRA rules: 1) the interests of the beneficiaries must be expressed as fractional or percentage interests as of the date of death of the IRA owner; and 2) separate accounts must be established by December 31 of the year after the IRA owner’s death.

If the trust meets all of these requirements, there is yet another issue to be considered: How does one determine trust accounting income and principal for purposes of distributions? While it is understood that all distributions from an IRA are subject to income tax, characterization of the distribution as trust accounting income or principal will determine whether the IRA distribution passes to the trust beneficiary or is taxed within the trust at the potentially higher trust tax rate.

The treatment of such distributions is addressed in Florida’s Uniform Principal and Income Act. F.S. §738.602 prescribes rules for determination of the trust accounting income of deferred compensation plans. The statute provides that if the IRA provider reports how much income was earned within the IRA, then that portion of the distribution shall be treated as trust accounting income and the balance will be treated as trust accounting principal. If the IRA provider does not report this information, the default rule requires that 10 percent of the distribution be allocated to income and 90 percent be allocated to principal. However, to the extent that the distribution is not a RMD or is a lump sum distribution, the default rule requires that the entire distribution be treated as principal. There is an exception carved out in the statute regarding qualification of the marital deduction.

For illustration, consider a situation where both spouses have assets equal to the current credit shelter amount. If the IRA owner spouse had no other assets to fund the credit, the IRA owner might name a credit shelter trust as the primary beneficiary of the IRA. If the surviving spouse is an income beneficiary of the credit shelter trust, then the surviving spouse will be the measuring life for RMD purposes. Suppose that, in a given year, the RMD for the IRA is $20,000 but the IRA is invested for growth and only earns $5,000 that particular year that can be characterized as income. The $20,000 RMD would be distributed to the trust. The $5,000 characterized as income would be passed out as an income distribution to the surviving spouse, taxable at his or her applicable income tax rate. The remaining $15,000 would be left in the trust as accounting principal. The trust would be responsible for paying the income tax on $15,000 which would, of course, probably be taxed at the higher trust tax rate.

This is not a total disaster, but if the surviving spouse is dependent upon receiving all of the RMD as part of such spouse’s annual income, it may be a surprise that only $5,000 is paid as opposed to $20,000. In the ideal family situation where the remainder beneficiaries are children of both spouses, this should not cause a problem; but in a multiple marriage scenario where the surviving spouse and step-children may not get along, this may be a source of some contention. It is possible and prudent to draft out of this situation by making provision in the trust document that all RMDs are to be treated as income and shall be distributed as such, so long as doing so would not violate the underlying intent of the trust.

The Case of the Reappearing Former Spouse


As in many states, F.S. §61.075 requires equitable distribution in the event of divorce. The estate planning issue most commonly overlooked after divorce is changing beneficiary designations. An Internet search of case law on IRAs reveals a proliferation of cases involving this very issue. The seminal case in Florida regarding this issue is Cooper v. Muccitelli, 661 So.2d 52 (Fla. 2d DCA 1995). The couple divorced and the husband subsequently died without changing his beneficiary designation to remove his former spouse. A question was certified to the Florida Supreme Court regarding the court’s holding that, without specific reference in a property settlement to life insurance proceeds, the beneficiary of the proceeds is determined by looking only to the insurance contract. The Florida Supreme Court examined the dissolution terms as well as the insurance documentation. The court’s analysis concluded that the husband had the ability to name anyone of his choosing as beneficiary and that clear instructions were provided to him regarding making a change of beneficiary. He took no action after the divorce to effectuate a change and, therefore, the former spouse remained as the beneficiary. This situation may be avoided with specific language regarding division of the IRA in the separation agreement10 or by simply executing a new IRA beneficiary designation.

Currently, the Florida Statutes provide that when someone fails to change their revocable trust or will after divorce,11 the former spouse will be treated as having predeceased the decedent. The statutes do not, however, govern any account whose disposition is determined by a beneficiary designation, such as an IRA.12 A proposed statute is currently being contemplated by the Real Property, Probate and Trust Law Section of The Florida Bar that would provide a similar presumption for IRAs and other pay-on-death accounts

The Case of the Beneficiaries Who Really Weren’t


There is a growing area of concern in the world of IRA administration regarding IRA annuities. Notwithstanding any opinions as to investment suitability or duplication of benefits in regard to creditor protection or tax deferral, the fact is that many IRA owners also own IRA annuities. In most cases, if an IRA owner wants to consolidate accounts for ease of record keeping, it is possible to transfer the IRA annuity into another IRA. If handled correctly, the IRA owner is still the annuitant, but the IRA is the owner and beneficiary of the annuity. The annuity becomes an asset of the IRA. If the ownership and beneficiary designation cannot be changed to reflect the IRA, the IRA owner should be advised of such and the IRA annuity should be handled as a totally separate account; but we do not live in an ideal world.

Consider a situation in which the parents have an extensive estate and the children are all quite successful in their own regard. The IRA owner decides to leave the IRA, valued at $1,500,000, to grandchildren, and signs a new beneficiary designation form. The next month’s IRA statement reflects the grandchildren as the beneficiaries of the IRA. Two months later, the IRA owner dies. Shortly thereafter, the IRA owner’s CPA and attorney discover that the bulk of the IRA is composed of five different IRA annuities with five different beneficiaries at four different companies. Some beneficiary forms named children and some named a defunct irrevocable trust listed as contingent beneficiary. How could the professionals preserve the IRA owner’s intent? The primary beneficiaries all disclaimed; the trustees of the irrevocable trust disclaimed; the estate of the deceased IRA owner disclaim; and finally, a settlement agreement was drafted and agreed to by all parties and filed in the probate court, documenting the IRA owner’s intent. Court orders were issued; all of the various annuities were eventually paid into the IRA; and the grandchildren all received death benefit IRAs just as the IRA owner intended. This story had a happy ending, with the possible exception of the attorneys’ fees, time, and court costs associated with resolving the problem, but not all families are ideal.

The outcome might have been dramatically different if the family had not been in agreement. This case could have potentially been tied up in court for several years. The expense in terms of legal fees and time could have been tremendous. The brokerage firm in question lists the annuities on the statement as a courtesy, but the market value of the annuities is reflected in the total market value, shown in the same place as the listed beneficiaries. To the untrained eye, and to the IRA owner, it would appear everything was in order. There is a disclaimer on the page where the annuities are individually listed stating that the brokerage firm is not responsible for the investment performance of the annuities; but there is no disclaimer stating that the annuities may have different beneficiaries than the rest of the IRA.

The moral of this story is that sometimes it is not enough to review the beneficiary designation forms or even keep copies of them. It is imperative for the IRA owner and their professionals to periodically review the IRA agreements that govern their accounts, and apparently review the statements as well.

Conclusion


Retirement accounts are rapidly becoming one of the largest sources of personal wealth in this state and in the country. Practitioners in this area need to consider not only the applicable tax laws but other issues that may not be as obvious. This article has attempted to address a few of the most common situations, although there are many, many more.

The new proposed and final regulations are included in §1.401(a)(9)-0 through §1.401(a)(9)-8; §1.403(b)-2; §1.408-8; and §54.4974-2.

Prop. Reg. §1.401(a)(9)-4, A-3(b) and §1.401(a)(9)-5, A-5(c)(3). 

3 Fla. Stat. §732.2075(1), (2).

Anton v. Merrill Lynch, 36 S.W. 3d 251 (Tex.App.-Austin, 2001).

31 Am. Jur. 2d Executors and Administrators §502 (1989).

6 See
Goter v. Brown, 682 So. 2d 155 (Fla. 4th D.C.A., 1996); Bielat v. Bielat, 721 N.E. 2d 28 (Ohio 2000); In re Estate of McIntosh, 733 A. 2d 649 (N.H. 2001); In re Estate of Gloege, 649 N.W. 2d 468 (Minn. App. 2002).

7 See also In re Estate of McIntosh, 773 A.2d 649 (N.H. 2001); In re Estate of Eastman, 760 A.2d 16 (Pa. Super. 2000).

8 Regs. §§1.401(a)(9)-4 A-5 and 1.401(a)(9)-5, A-7.

9 Regs. §§1.401(a)(9)-4 A-5 and 1.401(a)(9)-5. A-7.

10 See also
Vaughan v. Vaughan,741 So.2d 1221 (Fla. 2d D.C.A. 1999); In re Estate of Dellinger, 760 So.2d 1016 (Fla. 4th D.C.A. 2000); Luszcz v. Lavoie, 787 So.2d245 (Fla. 2d D.C.A. 2001). 

11 Fla. Stat. §737.106 and Fla. Stat §732.507.

12 See also
Schultz v. Schultz, 591 N.W. 2d 212 (Iowa 1999); Pinkard v. Confederation Life Insurance Company, 647 N.W. 2d 85 (Neb. 2002).

Thinking About Adding Medical Marijuana Referral to Your Practice?

Every Florida physician who serves as the primary care provider (“PCP”) for some or all of his or her patients should consider whether to become a “Qualified Ordering Physician” (“QOP”), with the ability to authorize Qualified Patients (“QP”) to receive medical marijuana (“cannabis”). Physicians in a number of specialties (i.e., pain management and oncology) are recognizing the value of cannabis for treating their QPs’ medical issues and are becoming QOPs.

The number of Floridians who are QPs and using cannabis continues to grow exponentially. According to the Office of Medical Marijuana Use (“OMMU”), one year ago, on March 16, 2018, there were 88,154 QPs. By March 15, 2019,that number had more than doubled to 194,997 QPs. During that same time period, the number of QOPs grew from 1,225to 2,106, again nearly doubling the number of QOPs in just one year. Besides the obvious economic reasons to consider becoming a QOP, there are compelling clinical reasons to seriously consider adding cannabis to your treatment recommendations to your patients.

Clinical Perspective

Along with “do no harm”, a fundamental principle of any medical practice is to alleviate a patient’s pain and suffering to the extent possible. It is entirely feasible that the debate about the efficacy and safety of cannabis may never be resolved definitively (although clinical and epidemiological studies in Europe do support reported improvement in patients’ conditions, particularly with the elderly). See Epidemiological characteristics, safety and efficacy of medical cannabis in the elderly, European Journal of Internal Medicine, March 2918, Volume 49, pp 44-50; https://www.ejinme.com/article/S0953-6205(18)30019-0/fulltext. Although there is a dearth of clinical and epidemiological studies in the United States, due in part by the classification of cannabis as a Schedule I drug, the anecdotal evidence suggests that, at a minimum, using cannabis can alleviate a patient’s pain, epileptic episodes, nausea from chemotherapy, etc. Consequently, the number of patients seeking this treatment, and the number of physicians who are permitted to authorize it, are predicted to continue to increase greatly.

The Florida Legislature recognized that cannabis has value in treating a wide range of patients when it incorporated thirteen (13) “qualifying medical conditions” into the statutory scheme regulating medical marijuana in Florida. Many of these conditions are treated by most PCPs; for example, cancer, glaucoma, Crohn’s disease, multiple sclerosis, and chronic nonmalignant pain.

Patients no longer are passive observers of their medical conditions. Many patients will decide to try medical marijuana. They will either seek a QOP on their own or ask their PCPs for referrals. Either way, there is likely to be some level of disruption in those patients’ plans of treatment. Possibly the best way to avoid this disruption is for patients to receive or have supervised all their medical care by one physician–their PCP.

Economic Perspective

Physician income from providing traditional clinical services is flat, at best, or, more likely, stagnating. Physicians in general, and PCPs in particular, cannot render more services or increase their rates in order to cover the gap between reality and their expectations.

PCPs recognize patient retention is critical to their financial success. Regardless of whether patient payments are made by fee-for-service, capitated, global fee, or some other basis, a loyal and stable base of patients is necessary for a physician to succeed in private practice. In order to develop patients who look to their PCPs for guidance and direction in making clinical decisions (“sticky patients”), medical practices have adopted satisfaction surveys and other measures that recognize that patients are not only medical care seekers, but also customers and have the same expectations as customers in other industries.

In order to develop and maintain “sticky patients”, physicians should offer patients as many medical services as they require from one source (of course, assuming that source is appropriately medically qualified to provide such services). Accordingly, physicians in general, and PCPs particularly, can minimize the likelihood of patients looking elsewhere for a QOP, or asking the physician for a referral to a QOP, thereby losing some or all their business. Becoming a QOP not only strengthens the “stickiness” of current patients, it may likely attract additional patients whose PCPs have not adopted this business model.

For both clinical and economic reasons (as well as a minimal capital investment), becoming a QOP is an attractive option for many physicians. Achieving this designation adds both another treatment modality and a new revenue stream. Working with legal and other advisors, every Florida PCP should evaluate whether becoming a QOP fits into, and will enhance, his or her practice.

By Stephen H. Siegel, Esq. and Cynthia Barnett Hibnick, Esq.

Original Article: South Florida Hospital News

Mixed Rates of Pay & The Fair Labor Standards Act

Often times employees receive different pay depending on the job they are doing. This creates a legally complex situation when it comes to paying overtime to these employees and doing so in compliance with the Fair Labor Standards Act (FLSA). If the employee worked at two different pay rates, then which pay rate is the overtime calculated based upon? The answer is not simple, in some cases a blended rate may be appropriate, however, courts, including a recent decision by the Fourth Circuit, have been skeptical of blended overtime rates. Blended overtime rates are acceptable, in some situations, but those are very specific circumstances where there is a specific number of overtime hours worked that does not vary.

There are many ways to calculate the overtime of a worker who makes different amounts for different tasks, and a lot depends on how separate and distinct these tasks are, which is a fine line drawn by the court in each case. Paying overtime at the maximum rate can cost employers, but paying overtime at an average, blended, or agreed upon rate, can lead to an expensive lawsuit.

There is no question special rules apply, and have been interpreted through hundreds of cases, as to how to pay workers who have different rates of pay for different jobs under the Fair Labor Standards Act (FLSA). These rules are complex and difficult to follow. I find most non-FLSA lawyers get these rules wrong, and I once defended a restaurant because it got the rules wrong, paid the employee too much, and the lawyer for the employee got the law wrong and sued for an overpaid employee. Figuring out how to pay your mixed rate employees correctly is a complex Fair Labor Standards Act (FLSA) exercise, and if you get it wrong a Federal Lawsuit is very costly to defend. Call Joshua Sheskin at the Broward County Florida Headquarters of Lubell Rosen for help in determining how to pay your employees, or if an employee is already filing suit claiming you got their pay wrong. – Joshua H. Sheskin, Esq., 954-880-9500 jhs@lubellrosen.com

Tipped Employees can still sue under the Fair Labor Standards Act (FLSA) depending on their tasks.

For about thirty years the Fair Labor Standards Act (FLSA) Rule has been that a tipped employee who receives less pay per-hour, because they are a tipped employee, must spend 80% of their time at work doing activities that are tip generating. This means 80% of the employees, time had to be spent on tasks directly related to serving the customer, thereby directly generating tips. Hence, napkin folding, “opening the restaurant,” and other tasks would need to be kept to less than 20% of a tipped employee’s time at work. In November of 2018 the Department of Labor rolled back this Fair Labor Standards Act (FLSA) guidance for tipped employees. However, courts have consistently held that the rule is still in effect, allowing cases to move forward against Buffalo Wild Wings, and Denny’s, as if the rule had not changed. The status of this rule, and how courts will treat it, changes constantly, and depends on the judge, because the Department of Labor rolling back this Fair Labor Standards Act rule for tipped employees was not done in the traditional way that agency rules change.

Whether one assumes that 80% of the time a tipped employee works must be spent on tipped activities to satisfy the Fair Labor Standards Act (FLSA), or less due to the rollback of the rule, what counts as a tipped activity is very specific and defined through hundreds of court decisions. Many activities that restaurants would normally consider tip generating tasks, are not tip generating tasks. It is difficult to know which tasks are tip generating, versus non-tip generating, without a Fair Labor Standards Act (FLSA) lawyer to guide you through the legal swamp that is tipped versus non-tipped tasks under the Fair Labor Standards Act (FLSA). For help in determining if your tipped employees are spending eighty percent of their time on tipped tasks, or if you have been sued by a tipped employee claiming to have done more than the allowed percentage of non-tipped tasks, call Joshua Sheskin at the South Florida Headquarters of Lubell Rosen. – Joshua H. Sheskin,Esq., 954-880-9500, jhs@lubellrosen.com

Florida Legislature Considers Bill To Require All Non-Provider Owned Practices To Become Licensed.

Under the Florida Health Care Clinic Act, most health care clinics not owned by a licensed physician or practitioner must apply for a license with the Agency For Health Care Administration (AHCA). The licensing process can be quite onerous and requires background checks of owners and certain employees, financial requirements, and inspections. Because the law was a result of investigations into personal injury clinics, a quirk in the language of the law made it possible for health care clinics that did not submit claims to either insurance or government payers to avoid the licensure requirement. There are many such practices in Florida that rely on patient only payments, including cosmetic surgery practices, diet centers, wellness centers, massage establishments and medical spas.

A new proposed statute, S.B. 732, which is designed to address cosmetic surgery centers, would change the law for all clinics and eliminate the reimbursement requirement and require all health care clinics that receive any payment that are not physician or practitioner owned to become licensed clinics. The Bill is currently winding its way through legislative committees and if passed, would affect a large number of practices in Florida.

By Bernard M. Cassidy

URGENT SCAM ALERT – Phony DEA Agent Contact to Doctors

To our physician clients and friends:

We want to let you know about a phony DEA agent scam that was attempted on one of our physician clients the other day.  Our client texted one of our partners, advising that he was on the phone with a person who represented herself as a DEA agent, who was calling to inform the physician that his license was going to be immediately suspended and he was going to be arrested.  We were able to instantly conference into the call with the “DEA agent” and physician.  The “DEA agent” identified herself with a DEA badge number, case number and the actual DEA main number as her contact number.  Upon our pointed questioning, it became apparent that the “DEA agent” was operating from a script and was unable to maintain the ruse.  The conversation did not get much further along, but appeared to be for the purpose of getting personal information for identity theft or to extort money from the doctor.  This is the second call of the same type in the last few weeks in which we have intervened.  It appears that the scammers are going down a list based on the physicians’ NPI numbers.  The real DEA is aware of the scam and has published a press release which may be found at https://www.deadiversion.usdoj.gov/pubs/pressreleases/extortion_scam.htm.

If you get a call from a person identifying himself or herself as an agent of the DEA, Social Security Administration or other government agency, there are several things to keep in mind:

  • While somewhat self-evident, most people tend to panic when they are threatened by a law enforcement figure;
  • The DEA does not call you to tell you that it is suspending your license (which it can’t do anyway) or call you to let you know you are being arrested.  Rather, agents will show up at your door and threaten to do all that in person;
  • The DEA, Social Security Administration and other government agencies do not call individuals to ask them to provide personal information, i.e.: date of birth, bank account numbers, etc. or seek a payment of a fine or penalty over the phone; and
  • A similar scam has also been happening with people calling claiming to be from the Social Security Administration. That agency has a recording on its main telephone number warning about the scam and advising where to report it.

If you receive one of these phone calls or are contacted by anyone who claims to be from a government agency, we suggest that you take the following actions:

  • If you are able to do so, call or text your legal counsel (preferably at Lubell | Rosen) while you are on the call, so counsel can conference into the call;
  • Tell the caller emphatically that you do not consent to having the call recorded; and
  • If you are unable to get legal counsel on the call, refer the caller to your legal counsel.  (A real government agent may not like the referral, but will understand that is what you should do.)  Then, decline to provide any information until after you speak with your legal counsel.

We hope that this information is helpful to you.

Just because someone is A Manager does not mean they do not need to be paid Overtime under the FLSA

On February 28, 2019, a jury verdict of 2.9 million dollars was entered against Stake ‘N Shake, for not paying overtime to their managers.

That amount is likely to be doubled by the Court within the two months, or so, because under the FLSA the amount the jury awards is often doubled as a legally mandated penalty against the employer. The issue is that the employees suing Stake ‘N Shake were managers, and they were still entitled to overtime. In a famous case Family Dollar was hit with a judgement against them of over ten million dollars when their managers sued them, and they appealed and the appellate court determined their managers were entitled to overtime.

However, one of the most common things that people claim to have knowledge of about the Fair Labor Standards Act (FLSA), and its overtime requirements, is that managers are not entitled to overtime pay. It is patently false that giving someone the title of manager means you do not have to pay them overtime. To not pay overtime, to someone you call a manager, they must fit a very specific set of legal guidelines that are interpreted through hundreds, if not thousands, of Court decisions. Failing to pay someone overtime, who meets the complex regulations interpreted through court decisions, means you can be sued for overtime in a very expensive Federal or State Fair Labor Standards Act (FLSA) Lawsuit. Often time payroll companies, and non FLSA Lawyers, get wrong which managers get overtime, and which do not. For help in knowing if your managers should be paid overtime, or if one of your managers is suing you for overtime, call Joshua Sheskin at the Ft. Lauderdale Florida Headquarters of Lubell Rosen LLC.- By: Joshua H. Sheskin, Esq., 954-880-9500 jhs@lubellrosen.com

Broward County attending physician held liable for $2,422,500.00 despite carrying malpractice insurance.

Another recent wrongful death lawsuit against an insured attending physician in Broward county demonstrates just how important personal counsel can be when the damages of a case threaten to exceed the limits of a physician’s malpractice insurance policy.

In 2014, an attending physician, Dr. A.M., was sued for medical malpractice and the wrongful death of his hospital patient.  A family medicine doctor, neurologist and cardiologist were also named as defendants.  The case concerned a patient who presented with symptoms of Guillain-Barre Syndrome.  The Plaintiff alleged that while this condition can be deadly, it is almost always survivable if a patient is properly monitored in an ICU setting.  The Plaintiff alleged that because the patient was left alone in a regular room, his progressive paralysis went unnoticed and he declined until he ultimately died. The Plaintiff alleged that Dr. A.M. as “the captain of the ship” failed to properly treat the patient and caused his death.

The Plaintiff offered to settle the entire case against Dr. A.M. for $250,000.00 (the policy limits) by sending a “Proposal For Settlement” (aka “PFS”).  A PFS is a time sensitive demand that carries significant penalties if not timely accepted and the judgment turns out to be 25% greater than the offer.  Had the insurance company timely accepted the PFS, the insurance company would be responsible to pay $250,000.00, the insured doctor would have owed nothing, and the case would have ended.  The offer was rejected.

Prior to trial, final summary judgment was entered for the other defendant doctors (family medicine, neurologist, and cardiologist), leaving Dr. A.M. as the only defendant doctor left in the case.

At trial, the jury awarded $2,085,000.00 to the Plaintiff.  A final judgment of $2,422,500.00 was entered against Dr. A.M.

Dr. A.M. had an opportunity to settle the case for $250,000.00.  Personal counsel may have prevented excess exposure against Dr. A.M.  Personal counsel could have advised Dr. A.M. of the risks involved in not accepting the PFS.  More importantly, the personal counsel could have cautioned Dr. A.M.’s insurance company that if they failed to timely settle the case, they would expose their insured to increase risk.  In some cases, courts have found insurance companies to be in “bad faith” by not accepting reasonable settlement offers and have forced the insurance company to be responsible for the entire judgment, even if it exceeds policy limits.

If you are named in a lawsuit, personal counsel will advise you of the legal risks you are taking.   Personal counsel will assist you in objectively assessing the defenses available and potential exposure at trial.  Personal Counsel will advocate for the physician and do his or her best to protect the physician from an adverse judgment in excess of policy limits.

 

Palm Beach Doctor held liable for $668,000 plus attorney’s fees, despite carrying malpractice insurance

Contrary to popular belief, medical malpractice insurance does not insulate a physician against personal financial exposure. In fact, most doctors in Florida only carry $250,000 in coverage when the malpractice verdicts commonly exceed $1,000,000.  You can do the math yourself.  Personal counsel can assist a physician by providing legal advice to best protect a physician against personal exposure when the damages of a case threaten to exceed the limits of the malpractice insurance policy.

A recent wrongful death lawsuit against a doctor in Palm Beach county demonstrates just how important personal counsel can be.   In 2015,  a plaintiff filed a medical malpractice case against Dr. B.C., a Board Board-Certified Orthopedic Surgeon.  The plaintiff claimed that Dr. B.C. negligently allowed his patient to resume a medication, Evista, following foot surgery.  The patient developed a DVT and pulmonary embolus which caused her death.  The patient was 60 years old.  The plaintiff claims that the death was caused by Dr. B.C.’s negligence and filed suit against him.

Dr. B.C. properly forwarded the lawsuit to his insurance carrier and the carrier appointed counsel to defend his case.  Dr. B.C., like most doctors would in situation, probably thought he was protected because he carried a $250,000 insurance policy.

Early in the litigation the plaintiff offered to settle the entire case for $250,000.00, the policy limits, by sending the plaintiff a “Proposal For Settlement” (aka “PFS”).  A PFS is a time sensitive demand that carries significant penalties if not timely accepted and the judgment turns out to be 25% greater than the offer.  Had the insurance company timely accepted the offer, the carrier would be responsible to pay the claim,  Dr. B.C. would owe nothing, and the case would have ended.  Instead, the carrier rejected the offer.

After an 11-day trial, the jury found in favor of the plaintiff and returned a verdict for $1,475,232.00. The jury apportioned 57 percent liability to Dr. B.C.  The Plaintiff also sought to collect his attorneys’ fees from the date of the settlement offer.  The court issued a  final judgment against Dr. B.C. in the amount of $668,604.79 plus attorney’s fees.  The insurance company appealed and lost.

Dr. B.C. had an opportunity to settle the case for $250,000.  Had he had personal counsel, the personal counsel could have advised Dr. B.C. of the risks involved in not accepting the PFS.  More importantly, the personal counsel could have cautioned the insurance company that if they failed to timely settle the case, they would expose Dr. B.C. to increase risk.  In some cases, courts have found insurance companies to be in “bad faith” by not accepting reasonable settlement offers and have forced the carrier to be responsible for the entire judgment, even if it exceeds policy limits.

Personal counsel may have prevented excess exposure against Dr. B.C.  If you are named in a lawsuit, personal counsel will serve as a key advisor and make you aware of the risks you are taking.   Personal counsel will assist the doctor in objectively assessing the defenses available and potential exposure at trial.  Personal counsel does not work for the insurance carrier.  Personal Counsel only advocates for the physician, doing his or her best to protect the physician from an adverse judgment in excess of policy limits.

 

Workers with Varying Hourly Rates Have Variable Overtime Rates an Employer Must Pay Or Risk Getting Sued Under the Fair Labor Standards Act (FLSA)

Overtime seems like an easy concept; the employee is entitled to 150% of their regular hourly pay for every hour of overtime they work. However, under the Fair Labor Standards Act (FLSA) there are special rules for employees who make different rates throughout the course of the week, and when those different jobs count as independent employment, versus when the work at both jobs must be counted towards the employee’s forty hours per-week. A typical situation where this arises is in a restaurant where an employee sometimes acts as a manager and sometimes as a server, in this case the hours worked as a manager and as a server may or may not need to be added together to determine if overtime is owed, it depends on how you have set up that employment arrangement on paper with the employee. On that note, if management and service is set up improperly, then if the employee makes more as a manager, than they do as a server, you cannot pay them overtime rates based on whether the overtime hours were as a manager or server, nor take the lower of the two numbers.  When an employee has a varying hourly rate, getting the overtime calculation wrong can lead to a very expensive Federal Fair Labor Standards Act (FLSA) suit. If you do not have a contract in place with a worker who does what you think are two separate jobs, a contract that is legally adequate to distinguish the jobs under the Fair Labor Standards Act (FLSA), then you can also face an expensive FLSA lawsuit. For help in avoiding expensive federal lawsuits when paying employees varying hourly rates call Attorney Joshua Sheskin at Lubell Rosen

Immigration and Customs Enforcement (ICE) Arrests Are Up Over 700% in 2018, If You Employed Illegal Workers You Need a Good Federal Employment Attorney on Call Now More than Ever

Hiring illegal immigrants exposes your business to serious liability issues that could end in Federal Charges, but at a minimum result in hefty fines and a shutdown of your business for a period. ICE has had a record year with more than 6,848 investigations in 2018, compared to 1,691 investigations in 2017, this is an over 400% increase. ICE plans, on increasing the number of investigations in 2019. In 2017 1,360 companies were audited for I-9 compliance, compared to 5,981 in 2018, an over 400% increase, and in 2019 ICE has been directed to increase this number even more. In 2017 there were 311 arrests by ICE on worksites, but in 2018 there were 2,304, an over 700% increase. As an employer you may have decided to take the risk of hiring illegal workers, and if you have then you may be faced with an ICE investigation or audit, and if that happens the repercussions for breaking Federal Laws regarding immigration, in the current political climate, are severe. When ICE shows up to your business for an ICE Audit or Investigation, it is not the time to try to talk your way out of trouble. If ICE finds out you employed illegal workers the issue is damage control, how much you and your business will be punished for the hiring of illegal workers is a matter of how good your attorney is at controlling the damage. If ICE shows up at your business, it is essential to call an attorney like myself who has years of experience as a labor attorney, has regularly dealt with Federal Agencies, and has years of Federal Criminal Defense experience, to control the fallout. If ICE shows up at your business call Attorney Joshua Sheskin at Lubell Rosen today. -By: Joshua H. Sheskin, Esq., 954-880-9500 or JHS@LubellRosen.com.

YOU CANNOT AGREE WITH YOUR EMPLOYEES THAT YOU DO NOT HAVE TO PAY THEM OVERTIME, EVEN IF THE AGREEMENT YOU MAKE PAYS THEM MORE

The right to overtime under the Fair Labor Standards Act (FLSA) cannot be given up in an employment contract, or agreed between the employer and employee not to apply. In hundreds of FLSA cases I have been involved in, one of the most common things employers are sued for is coming up with ways to pay their employees more, but that do not pay them overtime at one-and-one half times their regular hourly rate. Often times these employers tell me that the employee gladly signed a contract to be paid that way because it meant more money. A contract to pay less than one-and-one-half times the regular hourly rate for overtime hours is an illegal contract and completely unenforceable. An employee cannot give up his/her right to overtime, and an employer cannot agree to not follow the law. However, if you do want to pay your employees in a way that is not a strict hourly rate, and one-and-one-half times that rate for overtime, there are ways to do that for some employees. Other employees the Fair Labor Standards Act (FLSA) does not require you to pay overtime to. While exceptions to overtime laws can be applied to some employees, and other employees can be paid a salary that reduces the overtime rate (salaried employees are entitled to overtime), complex legal rules apply. Implementing a system of payment that does not subject you to lawsuits usually requires a labor lawyer. The Fair Labor Standards Act is a specialized field. To have a specialist help you avoid costly lawsuits call or email Joshua Sheskin at Lubell Rosen today – By: Joshua H. Sheskin, Esq., 954-880-9500 – JHS@LubellRosen.com

The Importance of Timely Retaining Personal Counsel

Doctor, when is the best time to treat an infection?  As soon as possible, right?  Timely care usually means that the least amount of harm has occurred, options are available, and a better prognosis.  If significant time passes before an infection is treated, sometimes it’s “better late than never,” but sometimes it’s “too little too late.”

 

The same is true for retaining personal counsel. Personal counsel is most effective if utilized as soon as possible. If significant time passes before a doctor retains personal counsel in a medical malpractice claim, sometimes it’s “better late than never” but sometimes it’s “too little too late.”

 

An unfortunate example of hiring personal counsel too late occurred during the 14-year medical-legal saga of Dr. M.S., a north Florida plastic surgeon.  Dr. M.S.’s patient died after a liposuction procedure.  The Estate hired legal counsel and issued a 90 day “Notice of Intent to Sue” to Dr. M.S., in accordance with Florida law.  Dr. M.S. forwarded the notice to his insurance carrier, First Professionals Insurance Company, Inc. (“FPIC”).

 

FPIC assigned Dr. M.S. legal counsel to defend the case. The assigned legal counsel was paid for entirely by FPIC.   During the pre-suit period, the plaintiff offered to go to voluntary binding arbitration.   Notably, the offer to arbitrate required Dr. M.S. to admit full liability for the claim and the arbitration would simply decide how much the damages were.  Based on FPIC’s review of the case, and the advice from his assigned counsel,  Dr. M.S. agreed to go to arbitration.

 

Six months after Dr. M.S. agreed to go to binding arbitration, he hired personal counsel.   Dr. M.S.’s personal counsel determined that the case was defensible, the offer to arbitrate was made in error, and that Dr. M.S. did not wish to arbitrate.  Unfortunately, the Court ruled that Dr. M.S. had agreed to voluntary binding arbitration and ordered the voluntary binding arbitration to proceed.

 

This was devastating to Dr. M.S. as voluntary binding arbitration meant that he: (1) admitted to negligence and liability, and (2) waived all defenses on liability.  Arbitration would simply to determine how much Dr. M.S. would pay in damages.  The arbitration award was $35,415,789.00 plus interest to the Estate.  A $43,000,000.00 judgment was entered against Dr. M.S.

 

Dr. M.S. was wise to retain personal counsel.  Unfortunately, it was “too little, too late.”  Critical legal decisions were made and there was no walking them back.  If retained at the outset, the personal counsel could have advocated for Dr. M.S. before the critical offer to arbitrate was made.  Personal counsel could have advised Dr. M.S. on the implications of admitting liability and arbitrating damages.

 

There is a lesson to be learned.  Early legal decisions will have a significant impact on your defense.  If you are confronted with a potential medical negligence claim, it is advisable to retain personal counsel as soon as possible to best protect your interests.

Personal Counsel protects doctors not insurance companies. Every doctor being sued for medical malpractice should have a personal counsel

When a doctor with malpractice insurance gets sued, the first thing he or she should do is forward the lawsuit to their carrier. The first thing a carrier will do is determine if it owes coverage to the doctor.   Sometimes the insurance company determines the claim is not covered by the policy.  Sometimes the insurance company will cover the claim but reserve their right to withdraw from defending the doctor. In either event, personal counsel can advocate for the doctor’s best interests.

If the insurance company determines that the reported claim is covered by the policy, the insurance company will appoint and pay for a lawyer to defend the insured doctor.  The insurance-appointed lawyer has obligations to both the doctor and to the doctor’s insurance company.

The Florida Bar permits insurance appointed attorneys to represent both the carrier and the doctor but has placed rules on such representation to avoid potential conflicts of interest.   For example, the insurance-appointed lawyer must provide the doctor with a “Statement of Insured Client’s Rights” form.  This is a very important document that doctors often sign without reading.  Notably, the form contains a paragraph about hiring your own lawyer, also known as personal counsel.

Personal counsel serves an important concurrent role in the doctor’s defense.  Personal counsel is a lawyer that is hand-selected by the doctor. Unlike the insurance-appointed lawyer, personal counsel’s obligation is to the doctor only.

Personal counsel serves an oversight role, monitoring the defense provided by the insurance company and always with the doctor’s best interest in mind.  Personal counsel can analyze the facts and relevant law in order to assist in the evaluation of the doctor’s risk and personal exposure.  Personal counsel can provide a valuable second opinion on the merits of the case and the potential exposure.

Personal counsel can make recommendations to the insurance-appointed counsel to help evaluate the case and move it towards a more favorable resolution.  Personal counsel can encourage the settlement of lawsuits where the value of the damages claimed are beyond the limits of the insurance policy.

Personal counsel can be a great ally and advocate, however personal counsel is not required.  Personal counsel will cost the doctor money on top of what he or she already paid for in insurance coverage.  Many doctors do not want to pay.    As a result of the cost, many doctors choose to rely on the insurance appointed attorney without seeking the help of personal counsel, ignoring the potential conflict of interest.  This could lead to disastrous results, in which the doctor gets advice that is good for the carrier, but not necessarily good for the doctor.

At Lubell Rosen, we believe that doctors deserve access to qualified and experienced personal counsel at an affordable cost.

For a doctor who has already invested so much in his or her medical career, there is simply too much at stake to forego retaining qualified, experienced and affordable personal counsel.

 

YOU CANNOT AGREE WITH YOUR EMPLOYEES THAT YOU DO NOT HAVE TO PAY THEM OVERTIME, EVEN IF THE AGREEMENT YOU MAKE PAYS THEM MORE

The right to overtime under the Fair Labor Standards Act (FLSA) cannot be given up in an employment contract, or agreed between the employer and employee not to apply. In hundreds of FLSA cases I have been involved in, one of the most common things employers are sued for is coming up with ways to pay their employees more, but that do not pay them overtime at one-and-one half times their regular hourly rate. Often times these employers tell me that the employee gladly signed a contract to be paid that way because it meant more money. A contract to pay less than one-and-one-half times the regular hourly rate for overtime hours is an illegal contract and completely unenforceable. An employee cannot give up his/her right to overtime, and an employer cannot agree to not follow the law. However, if you do want to pay your employees in a way that is not a strict hourly rate, and one-and-one-half times that rate for overtime, there are ways to do that for some employees. Other employees the Fair Labor Standards Act (FLSA) does not require you to pay overtime to. While exceptions to overtime laws can be applied to some employees, and other employees can be paid a salary that reduces the overtime rate (salaried employees are entitled to overtime), complex legal rules apply. Implementing a system of payment that does not subject you to lawsuits usually requires a labor lawyer. The Fair Labor Standards Act is a specialized field. To have a specialist help you avoid costly lawsuits call or email Joshua Sheskin at Lubell Rosen today – By: Joshua H. Sheskin, Esq., 954-880-9500 – JHS@LubellRosen.com

THE SECRET TO APPEARING PRO HAC VICE IN THE SOUTHERN DISTRICT OF FLORIDA

The Southern District of Florida is, arguably, the best place in the country to litigate Federal Claims. However, attorneys appearing pro hac vice often underestimate the importance of the choice of local counsel they associate. Worse, many attorneys appearing pro hac vice in the Southern District of Florida rely on the reputation of a firm, or its size, in determining who to associate as local counsel, neither of these factors are relevant, the attorney, not the firm, is the important thing in the Southern District of Florida. While it is easy to associate the wrong local counsel, it is a significant advantage if you pick the right local counsel. I have handled over 200 cases in the Southern District of Florida, which has taught me that knowing the preferences of the individual judges, strict adherence to the unwritten rules that the Southern District, like any other Court, has, and reputation, significantly impact your experience I the Southern District. I dedicate many hours every week to studying the jurists of the Southern District through their decisions and orders. I have been in the trenches on over 200 cases at all stages from pleadings, to victory as an appellant in the United States Eleventh Circuit Court of Appeals. When other attorneys ask me whether I think an argument, defense, or motion will work, I always ask is who the judge is before answering. Then I can often offer advice as to how to increase the odds of success, even if the field of law is new to me. The right local counsel is familiar to the court, and familiar with the court. The right local counsel can be determinative of your outcome. Good local counsel is a familiar face around the courthouse standing next to you (or in place at your option) and guiding you through the intricacies of practice in what is no doubt one of the best, and unique, places to practice law. If you need experienced local counsel in the Southern District of Florida, so that you can appear pro hac vice, call or email, Joshua Sheskin at Lubell Rosen. – By: Joshua H. Sheskin, Esq., 954-880-9500 – JHS@LubellRosen.com.

GAINING THE ADVANTAGE HANDLING FRIVOLOUS LAWSUITS

The cost of doing business successfully today, is that lawsuits are bound to happen, and many of them will be frivolous lawsuits. Routinely frivolous lawsuits are pursued by attorneys who know that even a frivolous lawsuit can be successful against companies who know it is cheaper to pay a settlement than spend years paying attorneys to wind through state court systems. There is a way to fight back, using a trick that puts frivolous lawsuit filers into waters they do not want to swim in, and may not be able to handle. If you are a company with corporate registration in a different state than you are being sued in, you can remove the case to Federal Court based on diversity jurisdiction. This accomplishes many things. First, federal cases move far faster than most state cases do. Second, an attorney who has never been forced into Federal Court will quickly find themselves overwhelmed and ill-prepared if they have never been in Federal Court before. Most lawyers practice in state, and not Federal Court, and the two court systems are completely different, Federal Courts are rigorous, and demanding, in ways state court lawyers have not handled before. Third, Federal Courts, generally, have less patience for frivolous lawsuits than state courts do. If you are a company being sued in Florida, Texas, or Colorado, and you would like to evaluate the benefits of removal to Federal Court by an experienced Federal Court attorney who has handled hundreds of Federal Cases, contact Joshua Sheskin at Lubell Rosen today.  By: Joshua H. Sheskin, Esq., 954-880-9500 – JHS@LubellRosen.com.

A WRITTEN AMERICANS WITH DISABILITIES ACT (ADA) POLICY IS ESSENTIAL TO PROTECT YOUR BUSINESS AGAINST LAWSUITS

The word disability has a very broad meaning under the ADA, and conditions you would not think are disabilities can lead to costly lawsuits if an employer does not have a policy to properly handle ADA Accommodation requests by employees. Believe it or not, an appellate court has held an employer liable for not allowing an employee with a sleep disorder to show up to work late every day. However, not all accommodations are required. The most important thing for an employer to do when faced with an ADA Accommodation request is to follow the right process and procedure, but the employer needs to have and disseminate a written ADA Policy, in advance, to truly protect themselves. Big, and small, employers are regularly sued for failure to accommodate employees under the ADA. Protect yourself today with a written ADA policy, and training as to how to properly use it, call Joshua Sheskin at the Ft. Lauderdale Headquarters of Lubell Rosen. By: Joshua H. Sheskin, Esq., 954-880-9500 – JHS@LubellRosen.com.

GAINING THE ADVANTAGE HADLING FRIVOLOUS LAWSUITS

The cost of doing business successfully today, is that lawsuits are bound to happen, and many of them will be frivolous lawsuits. Routinely frivolous lawsuits are pursued by attorneys who know that even a frivolous lawsuit can be successful against companies who know it is cheaper to pay a settlement than spend years paying attorneys to wind through state court systems. There is a way to fight back, using a trick that puts frivolous lawsuit filers into waters they do not want to swim in, and may not be able to handle. If you are a company with corporate registration in a different state than you are being sued in, you can remove the case to Federal Court based on diversity jurisdiction. This accomplishes many things. First, federal cases move far faster than most state cases do. Second, an attorney who has never been forced into Federal Court will quickly find themselves overwhelmed and ill-prepared if they have never been in Federal Court before. Most lawyers practice in state, and not Federal Court, and the two court systems are completely different, Federal Courts are rigorous, and demanding, in ways state court lawyers have not handled before. Third, Federal Courts, generally, have less patience for frivolous lawsuits than state courts do. If you are a company being sued in Florida, Texas, or Colorado, and you would like to evaluate the benefits of removal to Federal Court by an experienced Federal Court attorney who has handled hundreds of Federal Cases, contact Joshua Sheskin at Lubell Rosen today.  By: Joshua H. Sheskin, Esq., 954-880-9500JHS@LubellRosen.com.

A WRITTEN AMERICANS WITH DISABILITIES ACT (ADA) POLICY IS ESSENTIAL TO PROTECT YOUR BUSINESS AGAINST LAWSUITS

The word disability has a very broad meaning under the ADA, and conditions you would not think are disabilities can lead to costly lawsuits if an employer does not have a policy to properly handle ADA Accommodation requests by employees. Believe it or not, an appellate court has held an employer liable for not allowing an employee with a sleep disorder to show up to work late every day. However, not all accommodations are required. The most important thing for an employer to do when faced with an ADA Accommodation request is to follow the right process and procedure, but the employer needs to have and disseminate a written ADA Policy, in advance, to truly protect themselves. Big, and small, employers are regularly sued for failure to accommodate employees under the ADA. Protect yourself today with a written ADA policy, and training as to how to properly use it, call Joshua Sheskin at the Ft. Lauderdale Headquarters of Lubell Rosen. By: Joshua H. Sheskin, Esq., 954-880-9500JHS@LubellRosen.com.

Strict Time Keeping Rules Are the Only Way to Protect Against Fair Labor Standards Act (FLSA) Lawsuits

 

Often times employers have time records that show they paid an employee correctly, however, even with those records many employers lose Fair Labor Standards Act (FLSA) lawsuits. This is because while these businesses have a time clock, and pay their employees based on the hours that the time clock produces, they fail to have policies that eliminate the possibility of employees alleging that they worked off of the clock. Implementing proper procedures as to when your employee’s clock in and out, and what they must do after clocking out, is essential to avoiding liability in an FLSA suit, because if all you have is a time clock and it shows you paid, the employee will simply claim that they worked off of the clock. It is not as easy as telling employees that they may not work off of the clock, because the definition of work under the FLSA is so broad, and you did not have guidelines in place preventing them from working off of the clock. You do not need to give an employee permission to work off of the clock to owe them pay for off the clock work, they just need to work off of the clock, even if you have a rule against it. A well-written policy and procedure sheet detailing your time keeping rules can save you from tens of thousands of dollars, or more, in liability, and just as much in attorneys’ fees. Having your policies in place, and signatures on policy statements, before an employee attempts to bring a lawsuit, can save your business from paying significant amounts in legal fees, and liability, even if you have a time clock already. Your policies must go beyond prohibiting work off of the clock, and act to prevent any attempt to work off the clock. For help in drafting policies and procedure guides that prevent work from taking place off of the clock contact Joshua Sheskin at the Ft. Lauderdale Headquarters of Lubell Rosen. – By: Joshua H. Sheskin, Esq., 954-880-9500JHS@LubellRosen.com.

A Well Drafted Employee Arbitration Agreement Is Essential to Avoiding Costly Lawsuits

FLSA Lawsuits can cost employers significant amounts of money, both in defense costs and paying claims, however, there is a way to avoid these costly lawsuits. A well drafted arbitration agreement that covers actions brought under the Fair Labor Standards Act (FLSA), and other state/federal laws, is essential to avoiding several kinds of lawsuits. An arbitration agreement is an agreement that your employees sign which obligates them to bring their issues to an arbitrator you select, rather than to court. Employees who represent Plaintiffs in FLSA, and other, cases, rarely wish to pursue any action that involves arbitration, because it requires a significant investment on the part of the attorney in a type of case usually taken on contingency. The significant investment comes in the form of a filing fee for the arbitration. A filing fee for arbitration can cost that attorney ten times what bringing a lawsuit costs, and most Plaintiff’s attorneys are hesitant to invest that type of money up front, especially because under a contingency agreement they are only paid if they win. It is rare to find a Plaintiff’s Lawyer who wants to bring any type of case to arbitration because of cost, but also because arbitrators picked by employers tend to favor employers. Courts will enforce arbitration clauses, especially in FLSA lawsuits, but they must be written properly, and written to cover actions properly brought under the FLSA. An insufficient arbitration agreement, or a poorly written arbitration agreement, may not be enforced by a court. For help in drafting a proper arbitration agreement that a court can uphold contact Joshua Sheskin at Lubell Rosen’s Broward County Headquarters. – By: Joshua H. Sheskin, Esq., 954-880-9500JHS@LubellRosen.com.

 

Title VII Requires Employers to Accommodate Employees’ Religious Beliefs, Some But Not All of the Time

Title VII prevents an employer from discriminating on the basis of religion against employees, and applicants for employment. In order not to discriminate an employer must be willing to offer religious accommodations in some, but not all cases. A religious accommodation is an exception to a rule, procedure, job requirement, or standard, because an employee’s, or applicant’s, religious beliefs are violated by one of these workplace requirements. An example of a workplace accommodation is allowing a Muslim woman to wear a hijab, despite having policies against hats and other head coverings. When a religious accommodation would impose an unfair burden on the employer it is not required. However, whether the law will consider the burden on the employer one that excuses the employer from offering the accommodation is a complex question of fact and law that there is no one-size fits all answer for. The consequences of not offering an accommodation, when one was required, is a very expensive lawsuit, both to defend against and pay if the accommodation needed to be offered. Do not risk a lawsuit by having a different view of what an undue hardship is than the Court, contact Joshua Sheskin at the Broward County Headquarters of Lubell Rosen for help in determining whether an accommodation is an undue burden, or whether you must provide it. By: Joshua H. Sheskin, Esq., 954-880-9500JHS@LubellRosen.com.

There are Complex Rules as to How to Pay Nannies and Housekeepers

Your nanny or housekeeper may feel like family but housekeepers and nannies the families that serve all the time, and these lawsuits can get far more expensive than other lawsuits brought by employees because of the number of hours involved. There are very specific rules as to how nannies and housekeepers are paid, and often they sue when their employers part ways with them, even after ten years, or more, in the home. Defending against lawsuits brought under the Fair Labor Standards Act (FLSA) I run into cases all the time when in which a nanny was with a family for twenty years, or more, and then shocks them with a lawsuit when she leaves.

You must pay some nannies and housekeepers overtime, and other nannies and housekeepers you do not need to pay overtime. A nanny or housekeeper must be paid minimum wage for all hours they work. However, which hours a live-in nanny or housekeeper must be paid is a question that strongly depends on what their duties are, and, physically, where they sleep. Furthermore, whether you can claim a credit for what you pay a nanny or housekeeper for room and board is a complex question of law that depends heavily on the circumstances. If you can take a credit towards what you pay your nanny or housekeeper, for room and board, the amount is a question of law that depends on numerous factors. The Fair Labor Standards Act (FLSA) has different regulations for live-in domestic employees than non-live in domestic employees. Contact Attorney Joshua Sheskin at the Broward County Headquarters of Lubell Rosen, at 954-880-9500 or JHS@LubellRosen.com, for help in paying your nanny or housekeeper in accordance with the law. – By Joshua H. Sheskin, Esq., 954-880-9500 – JHS@LubellRosen.com

Accommodating an Employee is Not Always Required Under the ADA and Other Federal Regulations

On Tuesday a Federal Court in New Jersey ruled that the Port Authority would not be subject to a lawsuit for discrimination based on their failure to accommodate a Jewish employee’s request not to work on the Sabbath and Jewish Holidays. This does not mean that employers are free to ignore an employee who asks for accommodations. Religious accommodations have different requirements based on what type of employer you are. Private employers face cases based on an employee’s religion infrequently by comparison to lawsuits filed for failure to accommodate an employee under the Americans With Disabilities Act (ADA).

In the instance of a failure to accommodate a disability, the same concept applies that caused the Court to dismiss the claim against the Port Authority. An employee must offer a reasonable accommodation to a disabled person under the Americans with Disabilities Act (ADA), if they are capable of performing the essential functions of that job with the accommodation. However, when the accommodation would have a significant negative impact on other employees with the same job, violate rights granted to employees under a collective bargaining agreement, or change the nature of the job, the law does not always require the employer to accommodate the employee. When these exceptions apply is a complex legal issue and getting it wrong can mean significant legal liability. For help determining whether or not you must grant an employee an accommodation, under the ADA, call Attorney Joshua Sheskin at the Broward County Headquarters of Lubell Rosen. – By Joshua H. Sheskin, Esq., 954-880-9500JHS@LubellRosen.com

An Illegal Immigrant Can Sue Their Employer in Federal Court

One of the most common misconceptions that employers have is that illegal immigrants cannot sue their employers. Illegal immigrants can sue their employers in Federal Court for the non-payment of minimum wage, and overtime, pay under the Fair Labor Standards Act (FLSA). Under the FLSA it does not matter whether someone is in the country illegally, nor will they be deported for filing a lawsuit. There are places in the country where an illegal immigrant cannot bring a Federal Lawsuit, but in Florida, Alabama, Georgia, and other states, an illegal immigrant can bring a lawsuit under the Fair Labor Standards Act (FLSA). Employers have to pay all of their employees in accordance with Federal Regulations or risk an expensive lawsuit. – By Joshua H. Sheskin, Esq., 954-880-9500JHS@LubellRosen.com

Under Federal Labor Law Very Few Employees are Independent Contractors

The law does not give the option to employers to pay their employees as independent contractors by paying them via 1099 rather than W-2. For purposes of Federal Labor Laws, and the Fair Labor Standards Act (FLSA), an independent contractor is a person who is not economically dependent on any one employer as a primary source of income. When you hire someone to paint your house you are hiring them as an independent contractor, but when you own a business and your employees depend on you to make a living you cannot hire them as independent contractors. This comes as a surprise to many business owners, and I defend businesses all of the time that make the mistake of classifying their employees as independent contractors. The line between independent contractor and employee can get fuzzy, even a part time employee with a second job may, or may not, be an independent contractor. Companies such as Grub Hub have come under fire, recently, for classifying their drivers as independent contractors. Do not risk misclassifying your employees, it can be a costly mistake. For advice as to whether your employees are independent contractors call, or email, attorney Joshua Sheskin of Lubell Rosen. – By Joshua H. Sheskin, Esq., 954-880-9500JHS@LubellRosen.com

What does “And those Similarly Situated” mean next to the Plaintiff’s Name in a Fair Labor Standards Act Lawsuit

Next to the Plaintiff’s name in a Fair Labor Standards Act (FLSA) lawsuit there are often a variation of the words “and all those similarly situated” or “and those similarly situated.” Variations on “and those similarly situated” are very dangerous words if you are a business owner. The words can turn a lawsuit brought against an employer by one employee, into a lawsuit brought against an employer by several past and present employees, who the Court forces the employer to inform of their ability to join and facilitate the process of joining.

If the Plaintiff seeks to join “those similarly situated” into the lawsuit it is a two-step process.

The first step is for the Plaintiff to file a motion for what is called conditional certification. Conditional certification requires the Plaintiff to prove very little and the consequences of conditional certification are severe. The Plaintiff only needs to prove that there are other employees similar to them who wish to join the case, and similar to them can have a broad definition if the employer’s attorney is unsuccessful.

If conditional certification is granted a notice will go out to all employees with a similar job to the Plaintiff, past and present, for the last three years, informing them of their right to join the lawsuit and giving them a form to fill out to become a plaintiff.

I am pleased to report that I have recently defeated several of these motions, saving clients millions of dollars in potential liability. However, no attorney can guarantee that they can beat every motion for conditional certification. Plaintiffs have to prove very little to be granted conditional certification. If the employee is granted conditional certification the case moves to step two.

The second step of the process is that the Defendant takes discovery, which is the collection of evidence and depositions, to prove that the new employees joining the lawsuit are different from the original employee(s) who filed the lawsuit. At the end of discovery, the Defendant files a motion for decertification, arguing that the employees are distinct, not “similarly situated.” If the Defendant wins this motion, then the case goes back to the original employee(s) who filed the lawsuit. If the defendant loses then the case proceeds against the defendant with however many employees have chosen to join.

The FLSA allows every lawsuit filed under it, to be filed on behalf of the employee filing it and “all those similarly situated,” it is up to the business’ attorney to prove that there are not similarly situated employees by exploiting the legal aspects of the words “similarly situated.”

Not all lawsuits that have a variation of the words “and those similarly situated,” end up going through the two-step process. Sometimes the Plaintiff does not try to expand the group of Plaintiffs, but if the Plaintiff can expand the group, potential liability, and the cost to defend against the lawsuit, can exponentially increase.

A Surge in Lawsuits by Tipped Employees

Large restaurant chains have paid millions of dollars in settlement money for improper tip pooling arrangements. There are trends in lawsuits under the Fair Labor Standards Act (FLSA). Recently, suits by tipped employees suing their employers has become popular. Restaurants and bars of all sizes, across the country, are being sued by tipped employees who claim that they were tipped improperly. This is because there are a set of complex regulations as to how tipped employees are paid, and how they are informed about their pay. A business can pay a tipped employee correctly, but inform them of their pay incorrectly, and be subject to a lawsuit.

The issue of who can be included in a tip pool is complex and evolving. Including one employee, in a tip pool, who the law considers untipped, invalidates the way all tipped employees were paid.  How a tipped employee who does not tip out is informed of their pay, and the requirements on an employer relying on their state’s tip credit, is not as easy as following the advice of a payroll company. I have handled several FLSA Lawsuits for owners who relied on their payroll, and POS, companies. For advice on how to pay your tipped employees properly call Attorney Joshua Sheskin at Lubell Rosen at 954-880-9500 or JHS@LubellRosen.com.

Just Because an Employee is Salaried Does Not Mean an Employer Does Not Have to Pay Overtime

One of the most common mistakes that employers make is believing that because they pay employees a salary, the employers do not need to pay the employees overtime. There are employees who receive a salary, and do not need to be paid overtime because they are exempt from the law’s requirement to pay overtime. However, the duties that an employee performs, their training, and their position, determine whether they are exempt from the Fair Labor Standards Act’s (“FLSA”) overtime requirements, not if they are paid a salary.

I represent many employers who confuse the fact that most employees who are exempt from the FLSA’s requirement for overtime are often paid a salary, but those paid a salary are not necessarily exempt from the law’s requirement to pay overtime. Additionally, there are several ways that a salaried employee’s overtime pay can be calculated, and without guidance employers often pay too much, or too little. To make sure that you are paying your salaried employees correctly call attorney Joshua Sheskin of Lubell Rosen at 954-880-9500 or JHS@LubellRosen.com.

A Game Changers for Employers sued by Employees By: Joshua H. Sheskin, Esq.

For employees, whose employers classify them as exempt from overtime requirements, it just became harder to sue their employers. If an employee is exempt, an employer does not need to pay them overtime. Common exempt employees include, but are not limited to, managers, administrators, supervisors, chefs, commercial drivers, domestic employees, and commissioned salespeople.

Until recently, when an employee sued an employer for unpaid overtime under the Fair Labor Standards Act (FLSA), there was a strong legal presumption against the employer, because exemptions were narrowly construed. However, in April of 2018, in a case called Encino Motorcars (Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134 (2018)), the United States Supreme Court ruled that exemptions are to be given a fair reading. This evens the playing field between the employer and employee on the issue of exemption from entitlement to overtime pay.

Accidently paying someone as an exempt employee, who is not exempt, can lead to a very expensive lawsuit. To ensure you do not make a costly mistake call attorney Joshua Sheskin at Lubell Rosen now 954-880-9500 or JHS@LubellRosen.com.

Medicaid Taxi?? Fraud

A group of taxi companies allegedly took up a unique way of competing with ride share companies like Uber and Lyft; Medicaid Fraud. A New York man entered a plea agreement last week to a health care fraud conspiracy involving millions of dollars’ worth of fraud in charges for patient transportation. Medicaid pays for non-emergency medical transportation for beneficiaries who cannot afford their own transportation. Through a combination of kickbacks and fraud including charges for rides that never happened, the taxi companies ran up some hefty fares.

Bernard M. Cassidy

Lubell Rosen

bmc@lubellrosen.com