Monday, December 28, 2009
Wednesday, December 23, 2009
PRESIDENT OBAMA SIGNS RESTRICTION ON ARBITRATION CLAUSES FOR MILITARY CONTRACTORS INTO LAW
Most military contractors will no longer be able to enforce mandatory arbitration clauses in their employment contracts under a provision signed into law over the weekend. Specifically, no money can go to a defense contractor unless the contractor agrees not to enter into or enforce any employment contract "that requires, as a condition of employment, that the employee or independent contractor agree to resolve through arbitration any claim under title VII of the Civil Rights Act of 1964," or many tort claims. The restrictions will apply also to subcontractors starting in six months. Contracts and subcontracts under $1 million are exempt from the provision.
As a result of the new law, we recommend that all military contractors include a provision in their employment agreements whereby the parties agree to resolve all disputes related to the employment relationship by bench rather than jury trial. This means that the parties agree to have a judge, rather than a jury, make a decision with regard to any such dispute.
For more information on this topic, please contact Nicole Windsor at windsor@bowie-jensen.com.
Monday, December 21, 2009
Federal Estate Tax Legislation
The U.S. Congress may yet act before the year is out to extend or change the federal estate tax. If not, the 2001 legislation that has established exemptions and tax rates through this year is scheduled to expire for the year 2010. Then, in 2011, the exemptions and rates will revert to their pre-2001 rates. Here are the differences:
For persons dying in 2009, the last year of the 2001 legislation, an estate worth up to $3.5 million is exempt from federal estate tax, and from there tax is applied on the excess at graduated rates up to a top rate of 48%. After the one-year repeal, for persons dying in 2011, the exemption will be $1 million, with a top tax rate of 50% on larger estates.
Of course, Congress may act at the last minute to extend the current law in the short term, or enact something new. The uncertainty makes it all the more important for persons with potentially taxable estates to plan to take advantage of whatever exemptions may be available. (These changes do not affect Maryland’s estate tax structure, which has a $1 million exemption but a much lower tax rate on the excess.)
Typically the way estate tax planning is done, at least for married couples, is to provide in their Wills for the creation of a trust upon the first death for the benefit of the survivor. The survivor usually has an absolute right to distributions of income, sometimes small distributions of principal, with the rest subject to the trustee’s discretion to distribute more subject to the health, maintenance and support needs of the survivor. Upon the death of the surviving spouse, the trust is not part of his or her taxable estate, and what remains in the surviving spouse’s estate is subject to available federal and state estate tax exemptions. In this way, estate tax exemptions are applied to the assets of each spouse.
The trust created for this purpose can be funded upon the first death with a specific amount, such as the available federal exempt amount or the Maryland exempt amount. In the alternative, the Will can provide that such a trust is created and funded only to the extent the surviving spouse disclaims any of the estate initially passing to the surviving spouse. This approach provides for maximum flexibility for dealing with the uncertainties of the future estate tax.
Congress has been discussing the future of the estate tax, though no clear direction has emerged as yet. Even persons who believe they would not be subject to estate tax should consider tax planning because their assets may increase in the future and the available exemptions may change.
For more information on this topic, please contact Jay Merwin at Merwin@bowie-jensen.com.
For persons dying in 2009, the last year of the 2001 legislation, an estate worth up to $3.5 million is exempt from federal estate tax, and from there tax is applied on the excess at graduated rates up to a top rate of 48%. After the one-year repeal, for persons dying in 2011, the exemption will be $1 million, with a top tax rate of 50% on larger estates.
Of course, Congress may act at the last minute to extend the current law in the short term, or enact something new. The uncertainty makes it all the more important for persons with potentially taxable estates to plan to take advantage of whatever exemptions may be available. (These changes do not affect Maryland’s estate tax structure, which has a $1 million exemption but a much lower tax rate on the excess.)
Typically the way estate tax planning is done, at least for married couples, is to provide in their Wills for the creation of a trust upon the first death for the benefit of the survivor. The survivor usually has an absolute right to distributions of income, sometimes small distributions of principal, with the rest subject to the trustee’s discretion to distribute more subject to the health, maintenance and support needs of the survivor. Upon the death of the surviving spouse, the trust is not part of his or her taxable estate, and what remains in the surviving spouse’s estate is subject to available federal and state estate tax exemptions. In this way, estate tax exemptions are applied to the assets of each spouse.
The trust created for this purpose can be funded upon the first death with a specific amount, such as the available federal exempt amount or the Maryland exempt amount. In the alternative, the Will can provide that such a trust is created and funded only to the extent the surviving spouse disclaims any of the estate initially passing to the surviving spouse. This approach provides for maximum flexibility for dealing with the uncertainties of the future estate tax.
Congress has been discussing the future of the estate tax, though no clear direction has emerged as yet. Even persons who believe they would not be subject to estate tax should consider tax planning because their assets may increase in the future and the available exemptions may change.
For more information on this topic, please contact Jay Merwin at Merwin@bowie-jensen.com.
Thursday, December 10, 2009
More Privacy and Identity Theft Developments
Demonstrating that regulation of privacy is hard, the Federal Trade Commission (FTC) has AGAIN pushed back the enforcement of the Red Flags rule, now until June 1, 2010. http://www.ftc.gov/opa/2009/10/redflags.shtm. This might have followed a court loss, in which the American Bar Association convinced a court to hold that the red flags rule should not apply to lawyers. See https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2009cv1636-21. The ABA had previously won a similar case, where a court held that the privacy components of Gramm Leach Blilely also did not apply to lawyers. In case the reader thinks any of this is unfair to exclude lawyers . . . there is a long, long history of cases at the federal level noting a general intention in federal law not to regulate lawyers – and to allow that regulation to occur at the state level.
The Red Flag rules require “creditors” to establish a plan to fight identity theft. It sounds like a good thing on its face. The problem lies in the FTC’s overreaching definition of “creditor” in the Red Flag rules. As the FTC views it, if you accept payment at any time in the future, you are a “creditor.” This means, essentially, that everyone is a creditor under the rule. However, most of us do not have the capability to implement and monitor a real identify theft detection plan. Indeed, many “creditors” accept credit cards through third party vendors – often not even having possession of credit card data. The FTC is apparently going back to the drawing board in light of the ABA case and fixing its proposed rules.
Finally, in a recent case, Amburgy v Express Scripts, Inc., a federal district court in Missouri has thrown out a case where a plaintiff alleged that the defendant’s data breach – in which thousands of records with personal information were stolen – caused the plaintiff damages to protect his credit because of the possibility that his data was lost. The holding, which some blogs have erroneously mischaracterized as carte blanche protection for data owners, only held that the plaintiff had no standing to sue because he could not prove he had suffered a loss. For some reason, the plaintiff was apparently unable to prove that his records were part of the records that were taken by the data thief. All he could allege (and apparently prove) is that his records might have been lost, and that as a result of that possibility, he had to engage in credit monitoring. The case has a limited holding – and other cases have allowed plaintiffs to proceed under various tort and contract theories under similar facts. The law therefore remains rather unsettled in this area. Congress is considering a bill to federalize data breach notification, but as in past years, it is not clear it will bubble up to consideration with all of the other high profile legislative work being done.
For more information on this topic, please contact Mike Oliver at oliver@bowie-jensen.com.
The Red Flag rules require “creditors” to establish a plan to fight identity theft. It sounds like a good thing on its face. The problem lies in the FTC’s overreaching definition of “creditor” in the Red Flag rules. As the FTC views it, if you accept payment at any time in the future, you are a “creditor.” This means, essentially, that everyone is a creditor under the rule. However, most of us do not have the capability to implement and monitor a real identify theft detection plan. Indeed, many “creditors” accept credit cards through third party vendors – often not even having possession of credit card data. The FTC is apparently going back to the drawing board in light of the ABA case and fixing its proposed rules.
Finally, in a recent case, Amburgy v Express Scripts, Inc., a federal district court in Missouri has thrown out a case where a plaintiff alleged that the defendant’s data breach – in which thousands of records with personal information were stolen – caused the plaintiff damages to protect his credit because of the possibility that his data was lost. The holding, which some blogs have erroneously mischaracterized as carte blanche protection for data owners, only held that the plaintiff had no standing to sue because he could not prove he had suffered a loss. For some reason, the plaintiff was apparently unable to prove that his records were part of the records that were taken by the data thief. All he could allege (and apparently prove) is that his records might have been lost, and that as a result of that possibility, he had to engage in credit monitoring. The case has a limited holding – and other cases have allowed plaintiffs to proceed under various tort and contract theories under similar facts. The law therefore remains rather unsettled in this area. Congress is considering a bill to federalize data breach notification, but as in past years, it is not clear it will bubble up to consideration with all of the other high profile legislative work being done.
For more information on this topic, please contact Mike Oliver at oliver@bowie-jensen.com.
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