Michael Boxerman Selected to Franchise & Dealership Super Lawyers List

Michael Boxerman has been selected to the 2024 Illinois Super Lawyers list for Franchise & Dealership Lawyers. Each year, no more than five percent of the lawyers in the state are selected by the research team at Super Lawyers to receive this honor. Super Lawyers, part of Thomson Reuters, is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement. The annual selections are made using a patented multiphase process that includes a statewide survey of lawyers, an independent research evaluation of candidates and peer reviews by practice area. The result is a credible, comprehensive and diverse listing of exceptional attorneys. The Super Lawyers lists are published nationwide in Super Lawyers magazines and in leading city and regional magazines and newspapers across the country. Super Lawyers magazines also feature editorial profiles of attorneys who embody excellence in the practice of law.

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Enhancing Corporate Transparency: Corporate Transparency Act Takes Effect January 1st

Financial Crimes Enforcement Network - WikipediaThe Corporate Transparency Act (CTA) becomes effective on January 1, 2024. In an effort to reduce money laundering, the CTA requires “reporting companies” to disclose information about their “beneficial owners” to the US Department of Treasury Financial Crimes Enforcement Network (FinCEN). FinCEN will maintain a national beneficial ownership registry.

A “reporting company” includes all entities formed by filing a document with a secretary of state or tribal equivalent. Nearly all entities, such as corporations and LLCs, will be considered to be a reporting company, and therefore will be required to disclose information about their beneficial owners.

Twenty-three exemptions would excuse an entity from following the CTA’s reporting requirements, including an exemption for large operating companies. To qualify for this exemption, an entity must employ more than 20 full-time, US-based employees, have an operating presence at a physical, US-based office where business is regularly conducted; and demonstrate over $5 million in gross sales or receipts on the federal income tax return filed the previous year.

CTA defines a “beneficial owner” as someone who either directly or indirectly owns or controls at least 25% of the entity or exercises substantial control over the entity. An individual exercises “substantial control” over an entity when they serve as or perform the duties of an officer (such as president, secretary, treasurer, CEO, CFO, etc.), can appoint or remove any officer, or makes important decisions for the entity.

Reporting companies report specific must report beneficial ownership information (BOI) to FinCEN, including the person’s full name, date of birth, residential address, and identification number from a passport, driver’s license, state ID, or similar form of identification. They must also disclose the name of the entity and any names under which the entity conducts business, its principal place of business, its state of formation, and its taxpayer identification number (such as an EIN). Reporting companies must also report any changes to the information shared with FinCEN within 90 days of the change.

Reporting companies formed before January 1, 2024, must file their report with FinCEN no later than January 1, 2025. Those formed between January 1, 2024, and January 1, 2025, must file their reports within 90 days of formation, and reporting companies formed after January 1, 2025, must file their reports within 30 days of formation.

Anyone who willfully violates the CTA may face civil and criminal penalties, including fines between $500 and $10,000 per day, as well as up to two years of prison time.

Businesses should take the following next steps to prepare for the CTA: determine which entities may be exempt from the reporting requirements; determine the beneficial owner(s) of each reporting company; collect the BOI that will be reported; task someone with CTA compliance; and promulgate internal policies and procedures to collect and report BOI and any changes to BOI.

Please contact Marcus & Boxerman at (312) 216-2720 or firm@marcusboxerman.com with questions about the Corporate Transparency Act or for guidance as to how these updates affect your business.

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FTC Requests Public Comment for Potential Updates to Franchise Rule

The Federal Trade Commission (FTC) has recently requested public comment Federal Trade Commission - Wikipediaon how franchisors exert control over their franchisees and their franchisee’s workers. The FTC’s aims to gather information on this issue and to potentially update the its Franchise Rule. In a recent press release, the FTC highlighted the importance of franchise relationships and the need for stakeholders to provide feedback on these issues.

The FTC seeks public comment on a range of issues related to franchising, including the use of technology to monitor and control franchisees, the impact of joint employment on franchise relationships, and the adequacy of current franchise disclosure requirements. By gathering information on these issues, the FTC hopes to identify areas where improvements can be made.

According to the press release, the FTC is particularly interested in feedback on the use of technology to monitor and control franchisees–a growing issue in the franchise industry, as franchisors increasingly rely on technology to oversee their franchisees’ operations. The FTC seeks feedback on how franchisors use technology to monitor and control franchisees, and whether franchisees are given adequate notice and opportunity to object to these practices.

The FTC also seeks feedback on  joint employment issues, which has become a significant concern for franchisors. Franchisors may be held liable for the employment practices of their franchisees, and the FTC seeks on how this issue should be addressed in the Franchise Rule.

Finally, the FTC seeks feedback on the adequacy of franchise disclosure requirements. A Franchise Disclosure Document (FDD) is an important tool for protecting franchisees, as it provides franchisees with information about the risks and benefits of entering into a franchise agreement. The FTC seeks input on whether current disclosure requirements are sufficient, and whether additional disclosures should be required to ensure that franchisees are fully informed about the terms of their franchise agreement.

The FTC’s request for public comment could lead to significant changes in the franchise industry. Both franchisees and franchisors should be aware of the potential changes to the Franchise Rule, including increased disclosure requirements, changes to joint employment rules, and more detailed requirements around the use of technology.

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NY Times Article Highlights Tension Between Franchisors and Franchisees

The New York Times recently released an article highlighting rising tensions between franchisors and franchisees. According to the article, the Government Accountability Office released a report that support’s franchisee’s claims that they are being pushed out of profits generated by their business  to new fees, required vendors and restrictions on their ability to sell.

The report states that franchisees “do not enjoy the full benefit of the risks they bear” and that they lack control over basic operations that determine their ability to earn a profit.

The article discusses that franchisees are receiving support from the Biden administration and state legislatures, resulting in a growing wave of proposals to limit the power of franchisors, but that franchisors have been largely successful in stopping new laws and rules, with McDonald’s CEO, Chris Kempczinski, describing them as an “existential threat” to the business model. The franchise industry claims that its business model remains beneficial to individual owners, and that additional regulation would protect substandard franchisees at everyone else’s expense.

Legislative battles at the state and federal level reflect rising tension, with proposed legislation being introduced in New Jersey, Arkansas, and Arizona.  Meanwhile, the FTC has issued a request for more information on relationship between franchisors and their franchisees, while the NLRB proposed making it easier for franchisors and franchisees to be seen as joint employers.

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Illinois Paid Leave Act Will Require Illinois Employers To Provide Paid Leave Beginning January 1, 2024

Beginning on January 1, 2024, the Illinois Paid Leave Act (PLA) will require Illinois employers with more than 50 employees to provide paid leave to employees, which the employees may use “for any reason of the employee’s choosing.”

Under the PLA, employees accrue one hour of paid leave for every 40 hours worked, up to 40 hours during any 12-month period. Employees that are exempt from overtime requirements are deemed to work 40 hours each workweek unless their regular workweek is less than 40 hours.

Paid leave carries over year each year up to a maximum of 40 hours unless the employer chooses to provide its employees with the minimum amount of paid leave automatically on the first day of employment or the 12-month period. Employers need not pay an employee for paid leave accrued but not used. If an employee is rehired within 12 months of a separation, the employer must reinstate the employee’s previously accrued paid leave, which the employee may use immediately upon rehire.

Employees may begin using paid leave within 90 days of the start of their employment (or March 31, 2024, for existing employees). Employers may set a minimum increment for the use of paid leave of no more than 2 hours per day. The paid leave can be used “for any reason of the employee’s choosing,” the employee is not required to provide documentation in support of the leave, and the employer cannot require the employee to find someone to cover their work as a condition of allowing paid leave.

Employers must maintain records of employees’ accrued and used paid leave for at least 3 years and must provide employees with a written statement of their available paid leave upon request. Employers must also post a notice summarizing the PLA, which will be prepared by the Illinois Department of Labor.

Employers in Illinois should take note of the new requirements under the PLA and must ensure that they comply with the law’s requirements. Employers should also update their policies and procedures to reflect the new requirements and ensure that employees are aware of their rights under the PLA.

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Employee Retention Tax Credit May Provide Significant Pandemic-Related Tax Credits

PPP Loans are not the only relief the federal government is offering to businesses adversely affected by the pandemic. Under the CARES Act and Coronavirus Response and Relief Supplemental Appropriations Act, employers may qualify for Employee Retention Credits (“ERC”) of up to $19,000 per employee. This refundable tax credit is available to employers who:

  1. Had operations at least partially suspended during any calendar quarter in 2020 due to pandemic-related government orders;
  2. Experienced a year-over-year decrease in gross revenue of at least 50% for Q2, Q3, or Q4 of 2020; or
  3. Experienced a year-over-year decrease in gross revenue of at least 20% for Q1 or Q2 of 2021.

Contrary to what many people believe, businesses may still qualify for ERC even if they received PPP loans and were never completely shut down by governmental orders.

If your business was negatively affected by the COVID-19 pandemic and paid wages between March 12, 2020 and June 30, 2021, contact Marcus & Boxerman at firm@marcusboxerman.com.

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Illinois Employers Must Provide
Sexual Harassment Training By December 31, 2020

On January 1, 2021, an amendment to the Illinois Human Rights Act takes effect, requiring all Illinois employers to provide sexual harassment training to employees. Restaurants and bars will be subject to additional, industry-specific mandates in the new year, which we highlighted in an earlier blog post.

By December 31, 2020, all Illinois employers must provide sexual harassment prevention training to all employees, and must provide such training annually thereafter. This mandatory training must, at a minimum:

  • Define sexual harassment;
  • Provide examples of unlawful sexual harassment;
  • Summarize relevant state and federal sexual harassment laws, along with consequences for violating such laws; and
  • Summarize employers’ obligations to prevent, investigate, and correct sexual harassment.

In addition to the training required of all Illinois employers, restaurant and bar industry employers must also:

  • Have a written sexual harassment policy, available in English and Spanish;
  • Provide a copy of the policy to each employee within their first week of employment; and
  • Provide industry-specific sexual harassment prevention training to employees in English and Spanish, which must include “specific conduct, activities, or videos related to the restaurant or bar industry,” and explain managers’ legal responsibilities and liability related to sexual harassment.

The Illinois Department of Human Rights has released model training programs that meet the sexual harassment training requirements for all employers and for the restaurant and bar industry.

Enforcement of the amendment is under the jurisdiction of the Department, and compliance inspections will be triggered by complaints filed with the Department. Proof of sexual harassment prevention training must be provided upon request from the Department. Businesses out of compliance will be given 30 days to comply, or face civil penalties ranging from $500-$1,000 for the first offense. 

In light of these amendments, employers should review their employee handbooks, sexual harassment policies, and training materials to ensure they are in compliance with the Illinois Human Rights Act. If you have any questions about the new amendments or need assistance reviewing your employment materials, please contact Marcus & Boxerman at (312) 216-2720 or firm@marcusboxerman.com.

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Supreme Court Rules Federal Employment Laws Protect LGBTQ Employees From Discrimination

United States Supreme Court Building

On June 15, 2020, the United States Supreme Court ruled in Bostock v. Clayton County, Georgia that discrimination based on sexual orientation or gender identity violates Title VII of the Civil Rights Act of 1964. This decision resolves a longstanding split between federal courts and aligns federal law to a number of state and local statutes that already expressly prohibit discrimination based on sexual orientation and gender identity, including Illinois.

Title VII prohibits discrimination in the workplace “because of sex,” among other things. In Bostock, the Supreme Court held that discrimination on the basis of sexual orientation or gender identity is necessarily also discrimination “because of sex.” The Court’s reasoning was fairly straightforward: when an employer fires an employee “for being homosexual or transgender,” the employer “fires that person for traits or actions it would not have questioned in members of a different sex.”

The decision highlighted two examples of discrimination “because of sex.” If an employer fires a male employee for being attracted to a male employee, but takes no action against an otherwise identical female employee who is attracted to male employees, the employer discriminates against the male employee for traits or actions it tolerates in the female employee. Likewise, if an employer fires a transgender female (a person who was identified as a male at birth but now identifies as a female), but retains an otherwise identical cisgender female employee (a person who identified as female and birth and still identifies as female), the employer intentionally penalizes the transgender female for traits or actions that it tolerates in the cisgender female.

Therefore, the Court concluded, when an employer fires or takes adverse action against employees because of their sexual orientation or gender identity, the employer’s conduct necessarily constitutes discrimination “based on sex” in violation of the plain language of Title VII.

In light of this Supreme Court decision, employers should review their employment policies and employee handbooks to ensure their policies clearly prohibit sexual orientation and transgender discrimination. If you have any questions about the new ruling or need assistance reviewing your employment materials, please contact Marcus & Boxerman at (312) 216-2720 or firm@marcusboxerman.com.

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COVID-19 Guidance for Retail Businesses Entering Phase III

On June 3, 2020, Chicago joined the rest of Illinois by moving to Phase III of the State’s downloadplan to reopen the economy during the COVID-19 pandemic. Under this recovery phase, certain industries are allowed to reopen or expand their business operations while maintaining compliance with certain limitations and safety precautions. A list of these industries, along with industry-specific rules, precautions, and guidelines, can be found here.

Despite these industry-specific rules, there are certain challenges posed by the pandemic that will affect all businesses. In addition to the previous guidance we provided to retail businesses, businesses should consider the following as we move to Phase III:

  • New Employee Rules: Create a written policy of your new procedures to combat the transmission of COVID-19. New procedures may include mask requirements, heightened sanitation, COVID-19 assessments (discussed below), and CARES Act compliance. Also consider designating a COVID-19 contact, whom employees should call with any questions or issues related to these new procedures.
  • Employee Assessments: The Equal Employment Opportunity Commission has confirmed that employers can measure employees’ body temperature and ask employees if they are experiencing symptoms of COVID-19, so long as the information is kept confidential. To avoid confidentiality concerns, employers may consider not keeping documentation related to these assessments.
  • New Customer Rules: Create a written policy of rules customers are expected to follow and display it prominently. Customer-focused rules may include mask requirements, using designated entrances and exits, and requesting contact information in case tracing is necessary. Businesses, however, must consider whether someone could be a member of a protected class before refusing them service due to COVID-19 symptoms.
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Senate Passes CARES Act and DOL Issues Families First Act Guidance

The Senate unanimously passed the Coronavirus Aid, Relief, and Economic Security Act Whiteboardthe “CARES Act”), which provides businesses and individuals impacted by the COVID-19 pandemic with extensive financial relief. House passage is expected to follow shortly. The Department of Labor also recently released much-anticipated guidance regarding the Families First Coronavirus Response Act in the form of fact sheets and Q&A’s, as well as notices and posters that employers are required to display in their businesses, all of which can be found here.

Portions of the CARES Act that will benefit small businesses include widespread expansion of SBA loans and many tax-related savings, credits, and deferrals:

Expansion of SBA 7(a) Loans. Businesses that have been affected by the pandemic and have 500 employees or fewer will be able to obtain SBA 7(a) loans equal to 250% of their monthly payroll (up to an annual rate of pay for each employee of $100,000), up to a maximum loan of $10,000,000. These loans may be forgiven to the extent they are used between February 15, 2020 and June 30, 2020 to fund payroll expenses, make interest payments on mortgages, or pay rent and utilities. The loan forgiveness will be reduced by any proportionate reduction in employees compared to the prior year and a 25% or greater reduction in employee compensation. The amount forgiven will be excluded from the business’ gross income. The loans will be non-recourse (no security or personal guarantee required), and bear interest of 4% with a repayment period of 10 years.

Expansion of Other SBA Loan Programs. The CARES Act will also expand existing loan programs offered by the SBA as follows:

  • The maximum Express Loan will increase from $350,000 to $1,000,000. These loans provide borrowers with revolving lines of credit for working capital.
  • Businesses affected by the pandemic can access Economic Injury Disaster Loans and obtain an advance of up to $10,000 within 3 days of application to maintain payroll, make debt payments, and provide paid sick leave. Businesses that receive a 7(a) loan under the CARES Act will not be eligible to receive an Economic Injury Disaster Loan for the same purpose
  • The SBA will be required to pay the principal, interest, and fees owed on pre-existing SBA loans for six months, beginning with the next payment.

Tax Benefits. The CARES Act provides business with multiple forms of tax relief, including but not limited to refundable payroll tax credits, delay of payroll payments, changes to net operating loss carry back and limits, and roll back of net interest deduction limitation. We suggest you contact your tax advisor to determine what tax relief your business may be entitled to under the CARES Act.

If you have any questions about the CARES Act or the Families First Coronavirus Response Act, including how they may affect your business, contact us at (312) 216-2720 or firm@marcusboxerman.com.

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