Michigan Leads the Way With a New Corporate Form – The L3C

As of January 2009, Michigan is one of the few states to offer a new form of business entity.  If your business is for profit, but its primary focus is to accomplish socially beneficial acts, you may want to organize as a low profit limited liability, or an L3C.

The L3C is structured like any other limited liability company, with all the flexibility and advantages of a normal limited liability company, including being treated as a “pass through” entity for federal tax purposes.  However, the L3C must satisfy certain criteria to prove that its main goal is not to make a profit.

L3C’s are designed to qualify as a recipient of Program-Related Investments, or PRIs.  PRIs are IRS-sanctioned investments made by private foundations to support a charitable project or activity.  As a result of their charitable purpose, PRIs receive special treatment under federal tax law.

Historically, foundations have been reluctant to invest in for-profit businesses through the use of PRIs because of complex and costly IRS requirements to do so.  The L3C removes many of these hurdles and costs.

Hopefully, the L3C will make it easier for foundations to invest in Michigan’s community and economic revitalization.

This article was written by Natalie C. Najarian, Associate at Demorest Law Firm. Click here to view her professional resume.

What You Need to Know About the Bullard Plawecki Employee Right to Know Act

Under the Bullard Plawecki Employee Right to Know Act, employees are entitled to review their personnel records, make copies of those records, and file written statements clarifying or protesting any documents contained in their file. An employer’s use and disclosure of employee records are regulated by this Act as well.

The following are some of the important provisions of the Employee Right to Know Act that every employer should be aware of:

(1) Employers must make the personnel records of both current and former employees available to those employees upon written request, but not more than 2 times per year.

(2) Not all records are considered “personnel records” available for review by the employee.  Only records kept and used by an employer in determining an employer’s qualifications for employment, promotions, transfers, additional compensation, or disciplinary action must be available to employee for review.  Records that are not required to be open for review include, but are not limited to:  employee references, employee medical records if available to employee by other means, personal information regarding a third party which could be an invasion of privacy, and documents related to employer staffing plans.

(3) Employers may charge that employee for reasonable copying charges.

(4) If an employee disputes any of the information contained in his or her personnel file, the employee is entitled to submit a written statement explaining his or her position.  If either employer or employee knowingly put false information in the personnel file, legal action may be taken to remove such false information.

(5) An employer is prohibited from using in a judicial proceeding any personnel record information which was intentionally not included in the personnel record, but should have been as required by the Act.

(6) Any violation of the Employee Right to Know Act by an employer is grounds for a civil lawsuit.  A court may order the employer to comply with the statute and award an employee damages, including reasonable attorney’s fees and costs.

This article was written by Natalie C. Najarian, Associate at Demorest Law Firm. Click here to view her professional resume.

Working Minors Must Be Supervised by an Adult, Or Serious Penalties can be Assessed

School is out and many minors are looking for summer jobs.  Employers should be aware that special rules apply when employing a minor (any person less 18 years of age).  For example, a minor may not be employed unless the employer or another employee 18 years of age or older provides supervision.  Supervision means being on the premises to direct and control the work of minors and to assist in case of an emergency.  Generally this requires the supervisor to be within sight and sound of the minor.   Even a very mature seventeen year old cannot be allowed to work without adult supervision.

Failure to properly supervise a minor in the workplace is a violation of both the Michigan Youth Employment Act and the Health and Safety (MIOSHA) standards.  A violation of the Michigan Youth Employment Act is a misdemeanor and punishable by imprisonment of not more than 1 year or a fine of not more than $500.00 or both.

Serious penalties also apply for employing minors in occupations involving cash transactions after sunset or 8:00 p.m., whichever is earlier, without the required supervision. A violation of this particular provision of the Michigan Youth Employment Act is a misdemeanor and punishable by imprisonment of not more than 1 year, or a fine of $2,000 or both.  Repeated violations may lead to imprisonment for up to 10 years and a fine of not more than $10,000, or both.

This violation of the law could also possibly lead to civil liability if a minor were injured as a result of the lack of supervision.

This article was written by Natalie C. Najarian, Associate at Demorest Law Firm. Click here to view her professional resume.

The Ins & Outs of the Temporary COBRA Subsidy

On February 17, 2009, in an effort to ease the financial burden on so many Americans who have been recently laid off, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (“ARRA”).

Under ARRA, employees “Involuntarily Terminated” from their employment (and other qualified beneficiaries) anytime from September 1, 2008 through December 31, 2009, and who are eligible for and elect COBRA, may receive a federal government subsidy to help pay for their COBRA premiums.  They will be able to receive this federal government subsidy for up to 9 months.  Employees and other qualified beneficiaries will only have to pay 35% of their regular COBRA premium, with the other 65% being paid by the federal government.

“Involuntary Termination” includes layoffs, failure to renew employment contracts, termination for good cause by employer action, or forced retirement packages, if after the offer period a certain number of remaining employees in employee’s particular group will be terminated.  “Involuntary Termination” does not include voluntary resignation, divorce, dependent child ceasing to be dependent, death, or termination due to gross misconduct.

Employers are required to mail all eligible former employees (and other qualified beneficiaries) one of four different notices to notify them of the premium reduction and other rights provided to them under ARRA, including a second opportunity to sign up for COBRA. Each of the four types of notices is designed for a particular group of qualified beneficiaries and contains information to help satisfy ARRA’s notice provisions.

COBRA-eligible employees who lost their jobs between September  1, 2008 & February 16, 2009 (and other qualified beneficiaries) who either didn’t elect COBRA when offered, or elected COBRA but discontinued COBRA coverage have another chance to sign up for COBRA and get the reduced premium.  Employers were given a deadline of April 18, 2009 to send all former employees in this particular group a letter informing them of their second chance to elect coverage.

To summarize, employers must do the following to comply with ARRA: (1) Identify the eligible individuals; (2)  Calculate and report the subsidy to employees and the federal government; and (3) Provide the proper notice to all eligible individuals.

Employers should take note that if a qualified beneficiary becomes eligible for other health care coverage, the COBRA subsidy ceases.  It is not necessary for the qualified beneficiary to actually obtain other health care coverage to lose the subsidy.  All that is necessary is that the qualified beneficiary be eligible to receive the other health care coverage.

It is important that employers be careful to fully comply with the requirements of ARRA, as failure to apply the subsidy can mean tax penalties.  Likewise, employees should take care not to miss an opportunity to receive the subsidy.

This article was written by Natalie C. Najarian, Associate at Demorest Law Firm. Click here to view her professional resume.