On November 21st, the California Court of Appeals ruled in Donohue v. AMN Services, LLCregarding meal breaks and how they get tracked. Overall, Donohue is a positive wage and hour development for California employers. The case is also helpful in providing a roadmap for a design of an exceptionally good (and now, court approved) electronic meal break recording system (further described in the explanation of the decision), which enables an employer to track the reason for a noncompliant meal period and obtain notification with minimal administrative burden. California employers would be well-served to consider adopting a similar meal break monitoring system, which—considering the cost of defending against meal break claims, a perennial favorite of plaintiffs’ attorneys—would be money well spent. The Court’s decision and the intricacies of the case are further described below. (more…)
The California Court of Appeal recently rejected the ABC’s reading of a “single beverage condition” it used in a license issued to a Sacramento gas station. (Dept. of Alcoholic Beverage Control (ABC) v. ABC (Case No. C085199)). The condition read: “Beer and/or malt beverages shall be sold in original factory packages of a six-pack or greater, except malt based coolers. At no time, shall a single unit be sold individually, or in conjunction with another brand/size container of beer and/or malt beverage to constitute a six-pack or larger quantity.” The ABC took the position this required any and all beer to be sold as six packs or greater. The Court of Appeal disagreed, holding that the condition did not prohibit the sale of single beers that were not “originally packaged as six packs.” Look for the ABC to be more explicit in its conditional licenses in the future.
On October 31, 2018, the Treasury Department issued proposed regulations that fundamentally change the way that U.S. corporate borrowers can use controlled foreign corporations (“foreign subsidiaries”) to obtain better credit terms.
Under the old rules under Section 956, a U.S. corporation could obtain very little credit support from its’ foreign subsidiaries. This is because a guarantee or pledge of assets by a foreign subsidiary on U.S. corporate debt was viewed as an investment in U.S. real property by that foreign subsidiary, giving rise to a “deemed dividend” that was taxable in the U.S. under the old “Subpart F” income regime. Case law and IRS rulings have made it clear that this “deemed dividend” is not actually a dividend under the tax rules and, therefore, is not eligible for the preferred rate of tax on qualified dividends, among other matters. (more…)
Changes are in the works related to the processing of H-1B visa petitions, and employers intending to file such petitions should be aware. On Monday, December 3, 2018, the U.S. Citizenship and Immigration Services (USCIS) announced a proposal to change the annual cap-subject H-1B visa petition filing system in two significant ways: (1) the establishment of an online H-1B registration system; and (2) a major change in the procedures related to the annual H-1B visa cap lottery.
By law, the number of new H-1B visa petitions for professional worker beneficiaries is capped at 65,000 annually, with an additional 20,000 set aside for individuals with advanced degrees from U.S. universities. Advanced degrees are considered to be master’s degrees or higher. Certain employers, such as hospitals, non-profit research institutions and universities are exempt from this annual cap. As a result of this limitation on H-1B filings, the USCIS receives well in excess of the allowable number of petitions at the beginning of each year’s filing season, April 1. Accordingly, a random lottery has taken place in early April of each year. Employers are notified over the next few months if their petitions are among the lucky 85,000 selected. The numbers are daunting – approximately 198,000 petitions where received in fiscal year 2017, and approximately 236,000 in fiscal year 2016. (more…)
One of the bills signed into law by California Governor Edmund G. Brown from the most recent legislative session aims to hold customers accountable when hiring trucking companies that have a record of Labor Code violations. Under SB 1402, customers who utilize trucking companies to deliver goods from California’s ports may be held jointly and severally liable for certain Labor Code violations committed by those trucking companies. Here is the explanation for the need for this new law: “Holding customers of trucking companies jointly liable for future labor law violations by port drayage motor carriers who they engage, where the customer has received advance notice of their record of unsatisfied judgments for labor law violations, will exert pressure across the supply chain to protect drayage drivers from further exploitation.” And “Customers have the market power to exert meaningful change in the port drayage industry that has eluded California drivers for more than a decade.” (more…)
Just before Thanksgiving, IRS made two key pronouncements concerning the estate tax and gift tax.
1. In Revenue Procedure 2018-57, the IRS announced that for gifts made in 2019 or deaths occurring in 2019, the combined gift tax/estate tax exemption amount will be $11,400,000 per person (or $22,800,000 per couple with proper planning). This is up from $11,180,000 per person in 2018 (or $22,360,000 per couple). These exemption amounts also apply to the generation-skipping transfer tax. (more…)
In September, along with many other new employment bills, Governor Jerry Brown signed into law AB 2338, which includes a provision requiring minors 14-17 years of age and their parents/guardians to receive sexual harassment prevention training prior to the issuance of an entertainment work permit by the Labor Commissioner (with few exceptions, such permits are required in order for a minor to appear in any television show, movie, recording, etc.)
The new law provides that the training “shall consist of training administered by a third-party vendor, on-site, electronically, via Internet Web site, or other means” and must cover, at a minimum, the components specified in the Department of Fair Employment and Housing’s informational pamphlet on sexual harassment (Form 185). (more…)
In 2008, the California Supreme Court in Edwards v. Arthur Andersen LLP (2008) 44 Cal. 4th 937 set forth a broad prohibition against non-compete provisions, but left open the question of whether employee non-solicitation provisions are enforceable. A decade later, the California Court of Appeal for the Fourth Appellate District may have finally answered that question in the negative. (more…)
A taxpayer with a “seriously delinquent tax debt” may be in for a surprise if he or she has overseas travel plans. This is because the IRS has begun implementing its authority to instruct the State Department to pull delinquent taxpayers’ passports.
In 2015, Congress passed the Fixing America’s Surface Transportation Act, (“FAST”). In this context, FAST should be renamed “STOP” because it added Section 7345 to the Internal Revenue Code, which authorizes the IRS to disclose certain tax information to the State Department concerning taxpayers who owe the IRS more than $50,000. Armed with this information, the State Department may revoke, deny, or place limitations on, the delinquent taxpayer’s passport. (more…)
Internal Revenue Code section 199A attracted immediate attention when it was enacted last December, since it created a new tax benefit.
Section 199A allows individuals to deduct up to 20% of the “qualified business income” from certain types of businesses operated in “pass-through” form. Partnerships, limited liability companies, S corporations and sole proprietorships meet this definition because there is no corporate level tax and the earnings from the business pass through to the owners for tax purposes.
While the intent of Section 199A was to generally put business owners operating in pass-through form on the same footing as businesses who received a reduced 21% federal corporate tax rate, the complexity of the rules left many questions in need of clarification.
On August 8, 2018, the Treasury Department issued proposed regulations addressing some of these questions. One such clarification is the extent to which a buyer of a pass-through entity can avail themselves of the 20% deduction. (more…)