OBT Newsletter Spring 2008

A quarterly e-newsletter from Orgain Bell & Tucker, L.L.P.

Winter 2008

	This Issue
	THE LILLY LEDBETTER FAIR PAY EMPLOYMENT LAW-FAMILY RESPONSIBILITY DISCRIMINATION BANK VIOLATES TRUTH IN LENDING ACT ALL IN THE FAMILY- FATHER WINS $4 MILLION FROM DAUGHTER GENERATIONS-SKIPPING TRUSTS NEW NON-PROFIT TAX FORMS FAMILY MEDICAL LEAVE ACT -NEW REGULATIONS IN THE FIRM IN THE COMMUNITY

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visit our website at: www.obt.com

PRESIDENT OBAMA'S
FIRST BILL
THE LILLY LEDBETTER FAIR PAY ACT OF 2009

On January 29, 2009, President Obama signed his first bill into law. This law, titled the Lilly Ledbetter Fair Pay Act of 2009, changes the statute of limitations for cases involving pay discrimination. Pay discrimination suits are creatures of statute and normally the timely filing of a discrimination charge with an administrative agency is a necessary first step before a lawsuit can be filed. The new statute gets its name from Ms. Lilly Ledbetter, who lost her Title VII equal pay case against Goodyear in the Supreme Court in 2007 on the ground that she had waited too long to file her administrative charge of discrimination. Ms. Ledbetter proved to a jury that she was paid less than her male counterparts for performing the same work. She was awarded a large recovery but on appeal the Supreme Court held that she could not recover anything. The Supreme Court concluded that Ms. Ledbetter's original EEOC charge, which was a necessary prerequisite to her lawsuit under Title VII, had not been timely filed within the limitations period prescribed by the literal terms of the law. The limitations period was 180 days in Ms. Ledbetter's state although the period is 300 days in Texas. Goodyear's salaries were based on performance evaluations. Ms. Ledbetter proved that her pay was based on a discriminatory evaluation she received. The Supreme Court nevertheless concluded that Ms. Ledbetter's case was untimely and should be thrown out because she had waited more than 180 days to file her charge after she received the discriminatory evaluation. The Court rejected Ms. Ledbetter's argument that her charge should be considered timely because each time she received a paycheck based on the earlier evaluation she was discriminated against again and she had filed her charge within 180 days after receiving one of these paychecks. According to the Supreme Court, the later "effects" of past discrimination could not restart the clock for filing an EEOC charge under Title VII. The Lilly Ledbetter Fair Pay Act of 2009 amends Title VII, the ADEA and other laws to overrule the Supreme Court and to provide that for determining administrative charge filing deadlines an unlawful compensation practice is considered to have occurred not only when a discriminatory decision or practice is made initially, but also "when an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice." Thus, pay claimants now have potentially unlimited time to challenge employment decisions that happened long ago even though employer witnesses may no longer be available to testify and records may have been destroyed under retention policies. Fortunately, back pay is only recoverable starting two years before a charge is filed. Time will tell if this new law unleashes a barrage of new claims as several commentators predict. At a minimum, passage of this law shows that we can expect employment law "change" under the new administration.

Submitted by Robert J. Hambright Robert is Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization. His primary practice area is representing employers in labor and employment law matters, particularly litigation. He has represented employers and other defendants in a number of cases with published opinions. rjh@obt.com

texas

LLC

The majority of cases in family responsibility discrimination that find for the plaintiffs involve direct comments being made to the plaintiffs. The risk of a lawsuit due to such comments may seem obvious to lawyers or human resource professionals, but the message of the need to make employment decisions solely on business reasons is not necessarily reaching many managers and supervisors. As more and more individuals are educated on the dangers of "loose lips" in the workplace, more subtle actions may occur. Emphasizing the prohibition of such discrimination in the workplace in any format will reduce these claims.

Family responsibility discrimination focuses on the status of the plaintiff rather than a particular statute. If an employee becomes pregnant, begins caring for a sick parent or has children at home, the employee may be subjected to actionable discrimination. The EEOC and courts interpret various statutes to allow for recovery for this discrimination. The most commonly used laws to make complaints for Family Responsibility Discrimination are Title VII of the Civil Rights Act of 1964, including the Pregnancy Discrimination Act, the Equal Protection Clause under Section 1983, and the Family Medical Leave Act. Some causes of action also can be filed under the Equal Pay Act, ERISA, Americans with Disabilities Act and state common law.

The Pregnancy Discrimination Act makes it clear that employers cannot discriminate against female employees due to pregnancy or childbirth. 42 U.S.C. § 2000e(k). Family Responsibility Discrimination claims take this statute and others a step further to argue against "sex-plus" claims, such as a non-caregiving female employee being favored over a caregiving female employee. In addition, claims are being made based upon gender stereotyping, against both male and female employees.

The term "family responsibility discrimination" was coined by Joan Williams, a professor at the University of California – Hastings and Worklife Law Institute chair. Other terminology has emerged in this area as well. The "sandwich generation" refers to those that care for both young children and elderly parents.1 "Maternal wall" refers to a barrier in career advancement for women with children.

According to a report by the Center for Worklife Law at the University of California Hastings College of Law, Family Responsibility Discrimination cases as a whole increased 400 percent in 1996-2005 from the previous decade. In 1996, 97 cases of family responsibility discrimination were filed and in 2005 there were 481 according to a University of California Hastings College of the Law study. These types of cases are won by plaintiffs more than 50% of the time according to the study, yielding multi-million dollar verdicts and settlements. Examples of family responsibility discrimination include:

1. firing of pregnant employees or telling them to get abortions if they wish to remain employed.
2. giving promotions to less qualified fathers or women without children rather than to highly qualified mothers.
3. developing hiring profiles that expressly exclude women with children.
4. terminating employees without a valid business reason when they return from maternity or paternity leave.
5. giving parents work schedules that they cannot meet for childcare reasons while giving non-parents different schedules.

6. fabricating work infractions or performance deficiencies to justify dismissal of employees with family responsibilities.

7. refusing to hire or promote workers who are pregnant or mothers of school aged children if men with school aged children are hired or promoted.

8. refusing to hire or reinstate workers who are parents of children with disabilities.

9. assigning workers who are mothers to mommy track jobs which have lower pay, worse hours and little or no possibility for advancement.

10. interfering with a workers' right to take maternity, paternity or other family or medical leave.

11. retaliating against workers who have exercised their right to take family and medical leave.

Why so many cases? According to the EEOC, in 2/3 of families with children both caretakers work. The breakdown: 62% of married couple families have both parents in the workplace, 71% of single mother families have the single mother working, and 83% of single father families result in the single father working.

_______________________

¹Leslie E. Silverman, Statement, Perspectives on Work/Family Balance and the Federal Equal Employment Opportunity Laws (EEOC, Washington, D.C., April 17, 2007)

Submitted by Donean S. Surratt

Donean is an OBT partner and has a broad-based litigation practice with experience in toxic torts, premises liability, governmental liability, products

liability and employment law. She has been Board Certified by the Texas Board of Legal Specialization in Personal Injury Trial Law since 1997. You can reach Donean at sds@obt.com

	A husband and wife who operated a day-care business out of their home decided to take out a new mortgage on the home. Over the 10 years that they had owned the business they had taken corresponding deductions and depreciation on their tax returns to account for the business run from the home. As calculated for tax purposes, approximately 17% of the home was devoted to the day-care business, even though during the hours when the day-care business was open about 52% of the home's square footage was devoted to that use. The homeowners came to realize that their lender had dramatically increased their monthly payments and had sent the loan documents to them when it was too late by law for them to change their minds (more than three days after they signed the papers). They sued the bank under the federal Truth in Lending Act (TILA), asking that the loan transaction be rescinded. Among other things, TILA requires lenders to provide particular disclosures to borrowers of "high-rate" loans when points and fees exceed 8% of the amount borrowed. The bank had not made these disclosures to the borrowers at least three days ahead of the transaction, as required by TILA. The bank's response was two-pronged. First, it argued that TILA did not even apply to the case because of an exemption in the law for extensions of credit primarily for business or commercial purposes. Second, the bank took the position that the points and fees that the homeowners were required to pay could not count toward the 8% threshold because the homeowners had folded those costs into the loan instead of paying them up front in cash. A federal trial court sided with the homeowners on both points, allowing their case to go to trial.		Regarding the bank's claim that the "business purposes" exception in TILA should apply, the key fact was that, properly calculated, only a small percentage of the home was devoted to the business, thus defeating any attempt to argue that the loan was primarily for business or commercial purposes. As for the fact that the points and fees were financed, not paid in cash, this method of payment was of no consequence for purposes of meeting the 8% threshold. The applicable statutory language says only that the points and fees must be "payable" by the consumer at or before closing. The borrowers did bear the costs of the points and fees at the time of closing, no matter whether they were being paid then, deducted from loan proceeds, or, as happened here, added to the amount to be financed over time. Working in favor of the borrowers on both points was the fact that TILA is a remedial statute to be construed and applied so as to achieve its goals of assuring the meaningful disclosure of credit terms and avoiding the uninformed use of credit.

A jury has returned a multimillion-dollar judgment for the plaintiff in a case that is likely to make for strained relationships for one Michigan family. The winner, Richard, was the retired founder of a large automobile dealership. The loser was his daughter, Gail, to whom he had sold a controlling interest in the dealership. The jury agreed that Gail had made decisions that had hurt the dealership to such an extent as to cause the value of its stock to plummet, and eventually to put it into bankruptcy. The financial distress of the dealership had come to a head when it was discovered that the dealership had sold millions of dollars worth of vehicles that it had not paid for, a practice called "selling out of trust" in the automobile sales industry.

The main transgression by the second-generation ownership was the use of funds derived from shares in the dealership to buy two new car dealerships, one of which was located just across the street from the original business. Even though the dealerships sold different brands of vehicles, the competitive disadvantage caused by the new competition was clear. Not only that, but a clause in the agreement between Richard and Gail had restricted Gail from acquiring competing dealerships.

While the bulk of the jury verdict was attributable to breach of the noncompete provision, there were additional amounts awarded for a monthly consulting fee that Gail was supposed to have paid her father after she took over the business, for interest due on a loan under a "shareholder oppression" claim, and, for good measure, for sanctions.

If you have heard of generation-skipping trusts (GSTs) at all, you probably think of them as a way for wealthy families to shield their fortune from estate taxes. That is true as far as it goes, but GSTs can also have benefits for the less well off by protecting assets from ex-spouses and creditors and by serving as a place for appreciable assets to grow outside of taxable estates.

Although the phrase "generation skipping" sounds like an arrangement which leaves out children altogether in favor of the grandchildren, in fact what a GST "skips" is the taxation of assets put into children's estates by their parents. In a typical scenario, grandparents who are satisfied that their children are financially secure may decide to set up a GST in favor of all of their descendants as possible beneficiaries. Successive generations eventually receive the assets without the repeated imposition of estate taxes when each preceding generation dies. The assets are taxed only once, at the time of the initial transfer to the trust.

The first generation of children can be made to benefit as well. Although they technically won't own the assets in the trust, they can be given a right to distributions for their reasonable needs, meaning not only their support and maintenance, but also "comforts, conveniences, pleasures, and happiness." However, discretion over whether trust funds may be used for the benefit of the child must be exercised not by the child, but by a "disinterested trustee," that is, someone who is not a related or subordinated person as defined in the Internal Revenue Code.

There is a limit on the amount that can be transferred into a GST. Currently, the limit is $2 million for each person setting up the trust. In other words, a married couple could place up to $4 million in a GST. In 2009, the per-person amount is set to rise to $3.5 million. Any amount that is transferred in excess of the limit is subject to gift or estate tax when the older generation passes along the assets, and an additional "generation-skipping tax" is imposed when the children die and the property is transferred to the grandchildren. The potential estate tax benefits of a GST are easy to see when it is considered that each dollar over the limit is taxed at the highest estate tax rate, which currently is 45%.

If there are downsides to a GST for some people, they may be found in the fact that someone outside the family (the trustee) will become intimately involved in the family's money matters, and that it will be necessary to file an income tax return for the trust each year. Still, under the right circumstances and with proper planning under the guidance of a professional, these and any other drawbacks for a GST could pale next to the bottom-line advantages realized as assets are passed from generation to generation without Uncle Sam taking his cut.

The Internal Revenue Service recently published new draft instructions for a revamped version of Form 990, used by nonprofit organizations. The new rules will go into effect when nonprofits file their 2008 tax returns.

In the interests of greater transparency and accountability, more information now must be divulged about the inner workings of the nonprofit. There are some detailed questions about such matters as compensation for officials, fund-raising sources, and whether the organization has an ethics policy.

Whereas previously nonprofits with gross receipts of less than $25,000 were exempt from filing requirements, now all nonprofits must file some version of Form 990.

On November 17, 2008, the United States Department of Labor ("DOL") substantially revised the federal regulations addressing the Family Medical Leave Act ("FMLA"). These regulations will be effective on January 16, 2009. Some of the new regulations revise the rules for notice of the need for FMLA by employees, medical certifications, intermittent leave, use of paid leave and other related issues. Other parts of the regulations concern The Support for Injured

Servicemembers Act of 2007, which allows FMLA leave to an eligible employee to care for a covered family member who suffers a serious illness or injury while on active duty in the military. The new regulations also describe FMLA-protected leave for a "qualifying exigency" arising out of a covered family member's active duty in the military or an impending call or order for active duty.

Significantly, DOL's revised regulations provide that an employer's failure to follow the new employee notice requirements constitutes "interference" with employees' FMLA rights. All employers covered by the FMLA should update their written FMLA policies to incorporate the requirements of these new regulations.

Gilbert I. "Buddy" Low Re-Appointed as Vice Chair of Texas Supreme Court Advisory Committee
		Gilbert I. "Buddy" Low, a partner since 1965, is a nationally recognized trial lawyer. His practice includes litigation involving insurance coverage, antitrust, patents, trademarks, criminal RICO violations, pollution issues, class actions, contract disputes, and general business disputes. He is listed in Best Lawyers in America as one of the best trial lawyers in the country. You can contact Buddy at 409-838-6412

Congratulations to Gilbert I. Low on his continued appointment as Vice Chair of the Texas Supreme Court Advisory Committee. Mr. Low has served on this committee for over 10 years and this appointment lasts until 2011. Members of the committee are appointed by the Supreme Court. The committee was first created in 1940 and assists the Supreme Court in the continuing study, review, and development of rules and procedures for the courts of Texas. The committee drafts rules as directed by the Court; solicits, summarizes, and reports to the Court the views of the bar and the public on court rules and procedures; and makes recommendations for change.
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Interfaith of The Woodlands Five Who Share" Luncheon Highlights Volunteers Each year, Interfaith salutes five outstanding individuals who have invested in the community and have greatly inspired others through their volunteerism in the areas of Education, Health, Fine Arts, Youth and Senior Citizens. The 2009 Five Who Share Service of Excellence Awards luncheon will be presented by Interfaith of The Woodlands on Friday, March 13 from 11:30 to 1 p.m. at The Woodlands Resort & Conference Center at 2301 N. Milbend Drive. State Representative Rob Eissler is the Honorary Chair of this year's event and Nelda Luce Blair will serve as Emcee. Tickets for the event are $50 each, and 100% of the proceeds benefit Interfaith's programs and services. For tickets, more information or for sponsorship opportunities, contact Mary Jo O'Neal at (832) 615-8221.

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