Chicago’s Sweetened Beverage Tax Repealed Effective December 1, 2017

Posted on October 12, 2017 by mboxerman

enjoy-a-coke-1574937In a nearly unanimous vote by the Cook County Board on October 11th, the Cook County sweetened beverage tax has been repealed. Passed in early August 2017, the controversial tax was only in effect for two months before lawmakers decided to retire it. Proponents of the tax reasoned the tax is an effective way to fight obesity and other related health conditions, while also generating income for the county. Opponents of the tax argued that it damaged small businesses and led to plummeting store sales, as customers simply went across county lines to purchase beverages subject to the tax. Large corporations including PepsiCo and Coca-Cola spent millions of dollars fighting the tax. Lawmakers now have until the end of November to adjust the Cook County budget to account for the $200 million of revenue the County estimates the tax would have brought in. The repeal goes into effect December 1, 2017.

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Employers: Keep Your Hands Off Of Employee Fingerprints

Posted on October 4, 2017 by mboxerman

fingerprintA once little-known law, the Illinois Biometric Information Privacy Act (“BIPA”), is now the subject of class actions by employees alleging that employers have misused their biometric information.  This client update should help employers avoid unknowing violations of the BIPA and the significant risk of an employee class action lawsuit.

The BIPA sets restrictions on employers’ use of biometric information, such as scans of the iris or retina, fingerprints, handprints, and face or voice recognition. Because this information is sensitive and unique to the employee, the BIPA requires employers to store, transmit, and protect it securely.

The BIPA specifies that any employer in possession of biometric information must develop a written policy made available to the public. Your policy must establish:

  • A retention schedule for storing biometric information.
  • Guidelines for permanently destroying biometric information when the initial purpose for collecting it has been satisfied, or within 3 years of the employee’s last interaction with the company.

When collecting or otherwise receiving an employee’s biometric information, you must:

  • Inform the employee in writing that the information is being collected, the purpose for collection, and the length of storage.
  • Obtain a written release from the employee.
  • Store and transmit all biometric information with the same or better security than used for confidential company information.
  • Not sell, lease, trade, or otherwise profit from biometric information, or disclose it unless the employee consents or disclosure is required by law.

Penalties for violating the BIPA are harsh. If you are found to have negligently violated a provision, employees may recover a minimum of $1,000 for each violation, plus attorneys’ fees. If you are found to have intentionally or recklessly violated a provision, employees may recover a minimum of $5,000 for each violation, plus attorneys’ fees.

Importantly, although this client update focuses specifically on employee biometric information collected by employers, BIPA protections apply to anyone whose biometric information you collect, including your customers.

If you have any questions about whether your biometric information policy complies with the law or you would like a policy and employee release drafted in accordance with the Biometric Information Privacy Act and other applicable laws, please contact Marcus & Boxerman at (312) 216-2720 or firm@marcusboxerman.com.

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Cook County “Earned Sick Leave” Ordinance Effective July 2017

Posted on October 27, 2016 by mboxerman

termometer-1418018The Cook County Board of Commissioners recently passed the Earned Sick Leave Ordinance, requiring employers to provide paid sick leave to eligible employees.  The Ordinance goes into effect July 1, 2017.

To be eligible for paid sick leave, an employee must work at least two hours in a two-week period, and at least 80 hours in a 120-day period, for a covered employer, while physically present in Cook County.  Covered employers must have a place of business in Cook County and must employ at least one covered employee.  The Ordinance will not apply to collective bargaining agreements, to construction workers, or to employers with paid-time-off policies that already satisfy each of the Ordinance’s requirements.

Paid sick leave is available when an employee or one of his or her family members is ill, injured, receiving medical care or the victim of domestic violence.  Under the Ordinance, employees earn 1 hour of paid sick leave for every 40 hours worked.  An employee can use a maximum of 40 sick leave hours per year and roll over up to 20 unused hours to the next 12-month period.

Eligible employees begin earning paid sick leave on July 1, 2017, or the first calendar day after starting employment, whichever is later.  New employees may begin using their accrued leave after 180 days of employment.  There is no payout for unused sick leave.

Employers can adopt a written notification policy for taking leave that is not unreasonably burdensome, such as allowing notification of leave by phone, email or text message.  If an employee takes leave for more than 3 consecutive days, the employer may ask for certification, such as a doctor’s note, to ensure that the leave was for a qualifying purpose.

Employers must provide employees with notice of the Ordinance by conspicuously posting a notice in each facility where covered employees work and by providing each covered employee with written notice of his or her paid sick leave rights.  The Cook County Commission on Human Rights is preparing a form notice for distribution.

For more information about the Cook County Earned Sick Leave Ordinance, please contact Marcus & Boxerman at 312.216.2720 or info@marcusboxerman.com.

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New Illinois Law Renders Non-Compete Agreements for Low-Wage Employees “Illegal and Void”

Posted on September 13, 2016 by mboxerman

non-compete-selected-optionOn August 19, 2016, Governor Bruce Rauner signed into law the Illinois Freedom to Work Act (the “Act”).  The Act prohibits certain Illinois employers from entering into non-compete agreements with low-wage employees.  The law takes effect January 1, 2017.

The Act will render “illegal and void” any covenant not to compete entered into after January 1, 2017, between a private sector employer and a low-wage employee.  An employer under the Act is any entity, individual or group of individuals “acting directly or indirectly in the interest of an employer in relation to an employee, for which one or more persons are gainfully employed on some day within the calendar year.”  Despite the broad definition of “employer,” the Act will not apply to governmental entities.

The Act defines a “low-wage employee” as any employee paid the greater of, $13 per hour or the applicable federal, state or local minimum wage.  Therefore, in Illinois, the law applies to all employees earning $13 per hour or less.

The Act prohibits covenants not to compete, which are defined as an agreement that restricts a low-wage employee from performing any work (1) for another employer in a specified period of time, (2) in a specified geographical area, or (3) for another employer that is similar to the employee’s work for the employer with whom the employee has the agreement.

Importantly, the Act will not void non-compete agreements entered into prior to January 1, 2017.  The Act also will not affect agreements for the protection of an employer’s confidential information or trade secrets or non-solicitation agreements protecting an employer’s employees or customers.

There has been a recent general trend of challenging non-compete agreements for lower paid workers, and this law follows a lawsuit by the Illinois Attorney General over the use of non-compete agreements by quick service food chains, such as Jimmy John’s, attempting to prevent low-wage employees from working for competitors.

If you have any questions about whether your non-compete agreements or competition policies will be affected by the Act, contact Marcus & Boxerman at (312) 216-2720 or info@marcusboxerman.com.

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Restaurant Owners: Are You Taking Advantage of All Tax Credits and Deductions?

Posted on September 6, 2016 by mboxerman

tax-credits-selectedRestaurant owners can take advantage of many special deductions and credits providing substantial tax savings. Here are several to explore:

Tax Credits for Hiring in Empowerment Zones.  Tax credits are available for hiring employees who live and work in an Empowerment Zone, an area in need of economic revitalization as determined by the US Department of Housing and Urban Development. Eligible employees must be employed for 90 days before an employer may credit up to 20% of the first $15,000 paid to the employee (i.e. $3,000) per year.  There is no limit to the number of eligible employees for whom an employer can claim credit. This temporary program that has been extended until December 31, 2016, but credits are renewable each year pending IRS approval.

Full Purchase-Price Deduction on Qualifying Equipment.  Section 179 of the Tax Code permits businesses to deduct from gross income the full purchase price of new and used qualifying equipment and off-the-shelf software. The deduction limit for 2016 is $500,000.

Depreciation.  In recognition of the extensive usage restaurant equipment sees compared to most equipment, qualifying leasehold improvements and qualifying restaurant equipment are eligible for shorter 15-year depreciation periods instead of the standard 39-year scale. For 2015 to 2017, moreover, a bonus depreciation permits a business owner to take an additional 50% deduction on the cost of qualifying new property for the year it entered into service. This bonus amount decreases to 40% for years 2018-2019.

Tenant Improvement Allowances.  Section 110 of the Tax Code permits certain tenants of retail space to exclude from income landlord allowances used to construct or improve leased real property for the tenant’s benefit. This exclusion applies only to short-term leases (15 years or less) for non-residential real property. A lease or separate agreement executed as a provision of the lease must specifically state that the allowance must be applied toward construction on, or improvement to, qualified long-term real property used in the tenant’s trade or business.

Restaurant Remodel/Refresh Safe Harbor.  This safe harbor permits most restaurants and retailers to deduct 75% of qualifying remodel or refresh costs, requiring them to capitalize only 25% of the remodel or refresh. These costs must be incurred in connection with qualifying activities in a qualified building primarily used for retail and food and beverage sales. The safe harbor eliminates the computation and analysis of which costs should be expensed, capitalized and/or depreciated.

Credit for Portion of Employer Social Security Paid with Respect to Employee Cash Tips (FICA Tip Credit).  Restaurant owners may recover a portion of Social Security and Medicare taxes paid on income from employee tips. To receive the credit, employees must accumulate tips from customers by providing, delivering or servicing food or beverages and the employer must have paid or incurred employer Social Security and Medicare taxes on these tips. There is no credit for tips that help employees meet the federal minimum wage.

Employer-Provided Food.  Restaurant owners may deduct the value of meals furnished by the employer to an employee and his or her spouse and dependents for the convenience of the employer. To qualify for this deduction, the IRS requires the meals be necessary for the employee to perform his or her duties. Generally, “convenience of the employer” means the employee must remain on the premises in case of emergency or if allocated breaks are too short for the employee to reasonably get food elsewhere.

If you have any further questions about what deductions and tax credits your restaurant business may be eligible for, contact your CPA or Marcus & Boxerman at (312) 216-2720 or info@marcusboxerman.com.

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Seventh Circuit: Class and Collective Action Waivers in Employment Arbitration Agreements Unenforceable

Posted on August 8, 2016 by mboxerman

lewis-selectedThe Seventh Circuit Court of Appeals recently ruled that provisions in employment agreements requiring individual arbitration of wage and hour disputes are unlawful under the National Labor Relations Act (“NLRA”). The court found that such provisions violate employees’ right to engage in “concerted activities for the purpose of collective bargaining.”

In Lewis v. Epic Systems Corp., an employer required its employees to pursue wage and hour claims through individual arbitration and also waive their rights to any collective or class action proceedings. An employee later filed a class action in federal court, alleging that the employer violated the Fair Labor Standards Act (“FLSA”) and Wisconsin law by misclassifying the class members as “exempt” employees and thus depriving them of overtime pay. The trial court denied the employer’s request to compel individual arbitration. On appeal, the Seventh Circuit affirmed the trial court decision, finding the arbitration clause unenforceable because it violated the NLRA by interfering with the employees’ right to collaborate for mutual protection.

The National Labor Relations Board (“NLRB”) maintains that the NLRA prevents agreements that restrict employees from working in concert to resolve disputes and improve the terms and conditions of their employment through mutual aid and protection. Until Epic Systems, courts had not followed the NLRB’s position, instead relying on the Federal Arbitration Act (“FAA”), which permits such arbitration agreements as valid, irrevocable, and enforceable, save upon such grounds as exist at law. In issuing its ruling, the Seventh Circuit in Epic Systems found no conflict between the FAA and NLRA, finding that because the restrictions on collective or class actions are unenforceable under the NLRA, they are unenforceable under the FAA.

The Epic Systems ruling runs contrary to the other federal courts of appeals, making it quite possible that the Supreme Court will step in to resolve the conflict. Until then, class or collective action waivers in pre-dispute arbitration agreements in the Seventh Circuit (Illinois, Wisconsin, and Indiana) are unenforceable and employers should be aware that they cannot rely on such waivers.

Employers should keep in mind that arbitration agreements for employees without class or collective action waivers are still enforceable. While the holding is limited to waivers that require consent as a mandatory term of employment, the NLRB suggests that all class or collective action waivers are unlawful, even when an opt-out is provided.

If you have immediate concerns about how the decision affects your employees, contact Marcus & Boxerman at (312) 216-2720 or info@marcusboxerman.com.

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Illinois and Chicago Employment Law Update: Minimum Wage, Paid Sick Leave and Employee Retirement Accounts

Posted on July 15, 2016 by mboxerman

punch-clockThree important employment law changes in the City of Chicago and the State of Illinois may affect your business.

Chicago Minimum Wage Ordinance

On July 1, 2016, the City of Chicago’s minimum wage increased by 50 cents per hour, to $10.50 for non-tipped employees and $5.95 for tipped employees as part of the Chicago minimum wage ordinance approved in late 2014.  The Chicago minimum wage will increase to $13 by 2019.

Employers that either maintain a business facility in the City of Chicago or are subject to at least one Chicago license requirement are bound by the ordinance and must pay all covered employees over the age of 18 the higher minimum wage after the first 90 days of employment.

Employers must post notice of the increase to all employees and must also provide notice of the increase with each employee’s first paycheck received after the effective date of the increase.  The notice can be found here.

Chicago Paid Sick Leave Ordinance

In June, the Chicago City Council passed an ordinance requiring employers to provide paid sick leave.  The ordinance goes into effect July 1, 2017.

Under the ordinance, employees earn 1 hour of sick leave for every 40 hours worked, for a maximum of 40 hours per year.  A total of 20 unused sick hours can roll over into the following year, but there is no payout for unused sick days.  Accrual periods begin after an employee works 80 hours within a 120-day period.  Employees can start using their paid sick leave hours after a 180-day probationary period. Sick leave is available, for example, when an employee or one of his or her family members is ill, injured or receiving medical care, or if the employee is the victim of domestic abuse or sexual violence.

Individuals and business entities with at least one covered employee that maintain a business facility within the City of Chicago or are subject to at least one Chicago license requirement are bound by the sick leave ordinance.  Employers with paid time-off policies that already meet the ordinance’s requirements are exempt from this new ordinance.

Illinois Secure Choice Savings Program

Beginning July 1, 2017, Illinois will implement the Illinois Secure Choice Savings Program.
Under Secure Choice, employees may contribute to a Roth individual retirement plan through paycheck deductions.  Employees are automatically enrolled in Secure Choice but may choose to opt out.  Employers are required to facilitate contributions through the payroll process but are not required to make contributions to accounts or make any investment decisions.

Businesses with at least 25 employees and in operation for at least two years that do not currently offer a retirement plan must participate in the program.  Businesses in operation for less than two years or with fewer than 25 employees may choose to voluntarily participate.  Businesses with existing retirement plans cannot participate.  Employers have nine months from program inception to ensure their employees are enrolled or opted out.

If you have any questions about these changes, please contact Marcus & Boxerman at 312.216.2720 or info@marcusboxerman.com.

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Defend Trade Secrets Act Creates Federal Jurisdiction Over Misappropriation Claims

Posted on June 15, 2016 by mboxerman

dtsa-selectedCongress recently passed the Defend Trade Secrets Act (“DTSA”), vesting federal courts with the power to hear trade secret theft disputes and act immediately to resolve them. The DTSA took effect May 12, 2016, and further empowers American innovators to protect their intellectual property from theft.

The DTSA defines “trade secret” as any type of information, regardless of its form and how it is stored, for which the owner has taken “reasonable measures” to maintain its secrecy.  The information must also derive “independent economic value” from it not being generally known and not readily ascertainable through proper means. Examples include customer lists, confidential formulas and manufacturing processes.

Prior to passage of the DTSA, trade secret owners were required to bring an action in state court under individual state trade secret laws or to rely on federal prosecutors to bring criminal charges under the Economic Espionage Act.  Not surprisingly, trade secret protection has suffered from a lack of uniform results nationwide and costly, ineffective enforcement.  The DTSA creates a uniform framework for federal trade secret civil lawsuits. Its provisions are consistent with the protections for other forms of federally-recognized intellectual property, such as patents, trademarks and copyrights. The DTSA does not replace state laws, but rather supplements them with additional rights.

The DTSA allows a trade secret owner to file suit within three years of a misappropriation, and provides reasonable royalties, monetary damages or injunctive relief.  Overall, the DTSA provides trade secret owners more direction in crafting consistent policies to secure their trade secrets. Companies should nonetheless maintain strong security over trade secrets, such as regularly reviewing confidential information to see if any trade secrets exist and reasonably maintaining that information to ensure it stays a secret.  Companies should also develop a response plan for both misappropriations and seizure orders.

If your company has confidentiality agreements with employees, you must provide to them written notice of the DTSA whistleblower protections.  Failure to inform employees will preclude companies from recovering punitive damages or attorneys’ fees in any actions against the employee. For more information about DTSA protections and compliance, contact Marcus & Boxerman at (312) 216-2720 or info@marcusboxerman.com.

 

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New Federal Overtime Rule Takes Effect December 1, 2016

Posted on May 25, 2016 by mboxerman

overtime-selectedThe U.S. Department of Labor recently finalized a rule (the “Final Rule”) to update the federal white collar overtime exemptions.  The Final Rule, which takes effect on December 1, 2016, doubles the salary threshold—from $23,660 to $47,476 per year, or from $455 to $913 a week—under which most salaried workers are guaranteed overtime.  Hourly workers are generally guaranteed overtime pay regardless of their earnings level.  According to the Department of Labor, the Final Rule will make an additional 4.2 million workers eligible for overtime under federal law.

Overtime protections were first put into place by the Fair Labor Standards Act of 1938, and established the general rule that workers be paid time-and-a-half for any hours worked over 40 hours in a week.  In general, all hourly employees are guaranteed overtime, and salaried employees are presumed to have the same guaranteed right to overtime unless they (1) make more than a salary threshold set by the Department of Labor and (2) pass a test demonstrating that they primarily perform executive, administrative, or professional duties (the “Duties Test”).  A limited number of occupations are not eligible for overtime pay (including teachers, doctors, and lawyers) or are subject to special provisions.

The new overtime level will be automatically updated every three years to adjust to wage growth in the country.  Based on Department of Labor projections, the salary threshold is expected to rise to more than $51,000 when the first update occurs on January 1, 2020.

As a bit of good news for employers, the Department of Labor made no changes to the Duties Test concerning the white collar exemption, and the Final Rule permits nondiscretionary bonuses and incentive payments to count toward up to 10 percent of the new salary threshold.  Workers earning more than the salary threshold are still subject to the Duties Test to determine eligibility for overtime.

Employers should review their employment and wage payment practices well in advance of the December 1, 2016 deadline to determine whether any salaried employees may lose their overtime-exempt status.  If this is the case, employers have a number of available options, including (1) increasing an employee’s salary to the new $47,476 level, thereby permitting the employee to retain his or her exempt status, (2) classifying the employee as non-exempt and paying him or her time-and-a-half for all overtime hours worked, (3) prohibiting non-exempt employees from working more than 40 hours in a week or (4) reducing the employee’s salary such that salary plus overtime equals what he or she would have earned before the Final Rule.

For any questions about the New Rule or overtime compensation, please contact us at 312.216.2731 or info@marcusboxerman.com.

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Update: Avoiding The Franchisor Joint Employer Trap

Posted on May 12, 2016 by mboxerman

ivak-Bear-Trap-300pxIt’s an unsettling time for franchisors.  The NLRB’s new “indirect control” standard for finding a joint employer relationship (discussed here) is ambiguous and leaves many franchisors confused about how to protect their brand without becoming a joint employer with their franchisees and taking on liability for their employment decisions.  While the law surrounding the joint employer question is still developing, we offer some steps to take to protect yourself from a joint employer finding while maintaining necessary quality controls for your franchise system.

Define the Franchisor/Franchisee Relationship.  Most franchise agreements already explain that a franchisee is an independent contractor, not an employee.  Take it one step further by spelling out that the franchisor has no direct—or indirect—control over franchisee employment decisions.

Do Not Give Franchisees An Employee Handbook.  Do not provide franchisees with a sample employee handbook. Instead, advise franchisees to hire a third-party human resources professional or an attorney to help create an employee handbook and avoid unfair labor practices.

Stay Out of Employment Decisions.  Do not get involved in employment decisions such as hiring, firing, employee discipline, working conditions or wages and benefits.  Also, do not post job listings for franchisee locations or supply job applications to franchisees.

Eliminate Unnecessary Franchisor Controls.  Trim down your franchise operations manuals, training materials and communications, to ensure that you only provide mandates to your franchisees that are necessary to maintain your brand.  Leave the rest to the franchisees.  Do not set hours of operation for a location, work hours for employees or required inventory levels for your franchisees.

Limit Involvement In Franchisee Employee Training.  Make franchisor-provided training optional for franchisee employees below management level.  Franchisees should be solely responsible for training their workforce and must understand that a failure to maintain brand standards will result in a breach of the franchise agreement.  Providing “opening day” training to get a franchisee started is fine, but limit your franchisee training to things directly connected to maintaining your brand standards.

Educate Franchisor Field Personnel.  Make sure your field personnel know the current state of the law and understand what should and should not be communicated to franchisees.  Teach franchisor field personnel only to deal with management-level franchisee employees and to keep far away from franchisee employment decisions.  Also, either update your standards for inspections or consider hiring a third-party to make sure you maintain the appropriate distance.

Make Sure Franchisee Employees Know Who They Work For.  Require your franchisees to explain to their workforce that there is only one boss: the franchisee.  If any franchisee employees come to you with complaints, redirect them to the franchisee for appropriate resolution.

Avoid Monitoring Technology.  Stay away from technology that provides you with too much information about franchisee employees’ daily activities.  While it’s okay for a franchisor to recommend a specific POS system, if the system you recommend comes with software features for employee management, either unbundle that portion of the software or make clear that the use of those software features is optional.

Make Any Centralized Services Optional.  It’s acceptable to offer your franchisees centralized services for things like payroll, administration and accounting, but be sure your franchisees know these centralized services are optional and that they are free to choose a third-party provider of their choice.

Rethink Pricing Controls.  Price is an important part of many brands, but when a franchisor imposes pricing controls on franchisees it affects what the franchisees can afford to pay employees.  When prices are not imperative to your brand, consider letting franchisees control their own price maximums.   Franchisors may still use price-specific, limited-time advertising that affects your system; it’s just smart to leave the franchisee with control as often as possible.

Get an Experienced Attorney.  This area of the law is rapidly changing and an experienced attorney is a valuable tool for navigating it.  An experienced employment attorney can keep you updated on changes in the law and show you how to defend yourself.

Posted in Franchisee, Franchisor, Franchisor & Distributor Services, Joint Employer, Uncategorized | Tagged , , , , , | Leave a comment