Franchisor Liability in the Face of Misrepresentation
When considering franchise opportunities, due diligence is absolutely necessary prior to purchasing any franchise in order to protect yourself and your investment. What are your options when a franchisor misrepresents the estimated costs to operate a franchise in a disclosure document? Specific contract language for franchise liability will help to protect franchisees from purposeful fraud or misunderstandings.
Non-Compete Agreements and Non-Management Employees
A common question we are asked is whether employers may require non-management personnel to sign a non-compete agreement. The answer is yes, but there are limitations of which employers should be aware. To be enforceable in the State of Illinois, the agreement must (1) have adequate consideration, (2) be reasonably necessary to protect the employer’s legitimate business interest, (3) not impose undue hardship on the employee, and (4) not be injurious to the public. Courts will generally determine the enforceability of a non-compete agreement based on the totality of these factors. As of January 2017, however, employers are prohibited from requiring any low-wage employees under the Illinois Freedom to Work Act to sign non-competes. The Act effectively protects employees earning less than $13.00 per hour or minimum wage, whichever is greater. Read more…
Gender Identity and the Workplace
Gender identity is a protected class against discrimination under the Illinois Human Rights Act. http://www.ilga.gov/legislation/ilcs/ilcs5.asp?ActID=2266 The law protects employees against discrimination in all terms and conditions of employment, including hiring, selection, promotion, transfer, pay, tenure, discharge, and discipline. To ensure compliance, employers are encouraged to participate in diversity training, revise workplace policies, and to promote inclusivity.
Employers should also note that the Equal Employment Opportunity Commission (EEOC) https://www.eeoc.gov/ prohibits gender identity discrimination under Title VII. https://www.eeoc.gov/laws/statutes/titlevii.cfm EEOC has found that examples of unlawful discrimination include: failure to hire because a person is transgender, firing an employee based on a gender transition, intentional misuse of a transgender employee’s new name and pronoun, and denying an employee equal restroom access. In interpreting the Illinois Human Rights Act, state courts look to federal law.
Reporting Change of Address or Responsible Party with the IRS
Beginning with 2014, it is mandatory that businesses report changes in responsible parties to the IRS. For non-publicly traded entities, a responsible party is the person who has a level of control over, or entitlement to, the funds or assets in the entity that as a practical matter enables the individual, directly or indirectly, to control, manage, or direct the entity and the disposition of its funds or assets. For most small businesses, this is the primary owner of the entity.
Within 60 days of a change in responsible parties, the entity must file form 8822-B, Change of Address or Responsible Party-Business with the IRS to report the change. Although there are no direct penalties for failing to file the form, a failure to receive a notice of deficiency or demand for tax, the penalties and interest will continue to accrue, even though the responsible party fails to receive the notices.
All businesses with EINs should review their SS-4, Application for Employer Identification Number, and file Form 8822-B with the IRS to update any changes in business addresses and responsible parties, as soon as possible. Here is the link to IRS form 8822-B http://www.irs.gov/pub/irs-pdf/f8822b.pdf.
If you have any questions, please contact Ken McLaughlin at 630-230-8434.
Written By: Bob Kovanic, MBA, CPA, Padgett Business Services
NOTE: This publication should not be regarded as legal advice or legal opinion. The content is intended for general informational purposes only. If you have any concerns regarding anything in this publication you may contact your own attorney, CPA or our law office at 630-230-8434, website www.ma-lawpc.com.
Paid Sick Leave Update
There are several new state, municipal and county paid sick leave laws in Illinois that will affect employers’ Paid Time Off policies and benefits. Some or all may apply to your business depending on where you do business or where you have employees working. The following is a brief description of the main points of each new law.
Illinois HB 6162 Employee Sick Leave Act:
Took effect January 1, 2017.
- The Act does not specifically define Employer, so it is assumed that this Act applies to all Illinois Employers.
- Employees may use their personal sick leave time for absences related to the illness, injury or medical appointments for “immediate family” (child, stepchild, spouse, sibling, parent and spouse’s parents, grandchild, grandparent or stepparent).
- The time to be used is the employee’s personal sick leave benefits, not plan benefits, such as short- or long-term disability benefits.
- The amount of time to be allowed for immediate family versus personal sick time is not defined, but should be “for reasonable periods of time”.
How to Limit Your Liability to Subcontractor Employees for Workplace Injuries
In a recent decision, Carney v. Union Pacific Railroad Company, 2016 IL 118984 (Oct. 20, 2016), the Illinois Supreme Court provided some guidance to owners and general contractors on limiting their liability to subcontractor employees in construction injury cases. Under the common law, anyone who employs an independent contractor is generally not liable for that contractor’s acts or omissions, but the hiring entity may still be liable for its own negligence.
In this case, Union Pacific Railroad Company entered into a written agreement with a general contractor, Happ’s, Inc., to remove three abandoned bridges on property owned by the railroad. Under this agreement, Happ’s purchased the bridges from the railroad and agreed to provide the labor, tools, and material necessary for the work. The contractor hired a subcontractor to assist with the removal. An employee of the subcontractor was severely injured during demolition of one of the bridges, when a falling bridge girder severed his legs, and he filed a negligence claim against the railroad. The court considered owner liability under three potential claims: owner control, negligent hiring, and dangerous condition on the land.
Major Changes to Exempt Status under the FLSA
The Department of Labor (DOL) has made some pervasive changes to the Fair Labor Standards Act (FLSA) which will affect the minimum salary requirement for employees to be considered Exempt from overtime.
As of December 1, 2016 the DOL has raised the minimum salary for administrative, professional, and executive positions from $23,660 to $47,476 to be qualified for Exempt status under the FLSA’s minimum wage and overtime requirements. Highly Compensated Employees must be paid a minimum of $134,004 per year. This applies to all employers no matter how small.
In addition, the Department of Labor will adjust this base salary for administrative, professional, executive, and highly compensated employees. Also, there are still no salary level requirements for outside sales, teachers, doctors and lawyers. Read more…
Misconduct Expanded in Recent Update of Unemployment Insurance Act
On December 4, 2015, House Bill 1285 was signed into law, codifying how the industry defined employee misconduct for purposes of unemployment insurance claims. With the new legislation, the question becomes whether the clarified misconduct violations will automatically bar a former employee from obtaining unemployment benefits.
Prior to House Bill 1285, an employee was ineligible for unemployment benefits if he or she committed egregious acts such as committing a theft or felony, for work-related misconduct, out of work because of a labor dispute, or if the employee quit voluntarily without good cause. Illinois Appellate Courts have held that a policy did not need to be written or even articulated in circumstances where the behavior violates a policy which is self-evident, such as stealing, Ray v. IDES, 244 Ill. App. 3d 233 (1st Dist. 1993) or fighting, Bandemer v. IDES, 204 Ill. App. 3d 192 (1st Dist. 1990). However, in situations where the misconduct was not specifically addressed in employer policies, proof of warnings to the misconduct that violated the policy was required. See Zuaznabar v. Bd. of Review, 257 Ill. App. 3d 354, 358 (1st Dist. 1993) Read more…
Criminal Background Check and “Ban the Box”
Effective January 1, 2015, Illinois legislature enacted a law that requires private employers with 15 or more employees to remove “the box” on their employment applications which asks whether or not the applicant has been convicted of a felony. Thus the name “Ban the Box”.
Some employers ask that potential applicants complete an employment application before an interview or job offer. In the past, most employment applications asked whether or not the person has been convicted of a felony or a similar question.
With the new law in place, employers are now compelled to consider only whether or not the applicant is “qualified” for the job based on information provided by the applicant and prior to an interview. Once a decision has been made to conduct an interview or provide a conditional offer of employment, then the employer may require a criminal background check.
There are three exceptions to this rule: 1) if federal or state law excludes specific criminal convictions because of the nature of the position being applied for, 2) if a fidelity or equivalent bond is required and certain convictions would disqualify the candidate, or 3) the position requires an Emergency Medical Services (EMS) license.
Domestic Violence in the Workplace
Unfortunately it sometimes takes a tragedy such as the recent shooting of Nadia Ezaldein at Nordstrom store by her ex-boyfriend, Marcus Dee, to make us as business owners think about what we could have done to prevent this from happening in our place of business. Fortunately, the State of Illinois has 2 little known laws in place that can offer both employees and employers some added protection from domestic violence and abuse in the workplace. These are the Victims’ Economic Security and Safety Act (VESSA) and the Workplace Violence Prevention Act.
- Ban the Box
- Cook County
- Criminal Background Check
- Employment Contract
- Federal Law
- Gender Identity
- Handbook Policy
- Human Resources
- Illinois Human Rights Act
- Illinois Law
- Intellectual Property
- IRS Regulations
- Job Posting
- Medical Marijuana
- Non-Compete Agreements
- Non-Management Employees
- Paid Sick Leave
- Paid Time Off
- S Corporation
- Same Sex Marriage
- Title VII of the Civil Rights Act
- United States
- Violence in the Workplace
- Vital Records Act
- Weapons in the Workplace
- Work Visas
- Workers' Compensation