Thursday, August 6th, 2015
On July 15, 2015, David Weil, the Department of Labor’s (“DOL”) Administrator of the Wage and Hour Division, issued an Administrator’s Interpretation Memorandum (“Guidance”) interpreting the Fair Labor Standards Act broadly to include most workers as “employees” as opposed to independent contractors. The Guidance is significant because as many as one third of the American workforce is estimated to be employed in the rapidly growing “sharing” or “gig” economy,[1] and these individuals are frequently classified as independent contractors. The Guidance is the latest DOL initiative designed to attack misclassification of workers.
Employers who use independent contractors must reexamine their agreements and working relationships with contract workers, as this new Guidance signals a new and very real threat of increased liability for employers.
Application of Economic Realities Test
Recognizing that courts have employed different tests when examining the classification issue, the Guidance states that the DOL will use the six factors “economic realities” test.[2] These same factors are currently used by the Fourth Circuit when analyzing whether a worker is an employee or independent contractor for purposes of the FLSA.[3] The central question for employers in Virginia (even before the Guidance was issued) is “whether the [workers] were, as a matter of economic reality, dependent on the business they serve, or, conversely, whether they were in business for themselves.”[4]
Here is a quick look at what the new Guidance says:
- In terms of evaluating how “integral” an employee’s work is to the employer’s business, the Guidance suggests that a true independent contractor’s work is unlikely to be integral to the employer’s business. By way of example, the DOL suggests that a carpenter that works for a construction company and frames residential houses is someone who is integral to that employer’s business. In contrast, a worker who is with a software developer and who is hired to assist the construction company to develop programs to track its work is not integral to the business.
- In terms of “managerial skill,” the Guidance suggests that the ability to hire others, purchase materials and equipment, advertise, rent space and manage time tables, affects a worker’s opportunity to gain a profit or suffer a loss are the focus. The Guidance distinguishes between managerial skill and one’s ability to set his or her own hours. The difference is vital because a focus on a worker’s ability to “work more hours” has been used in the past to show the worker had a potential opportunity to experience profit or loss. The Guidance argues, however, that the ability to simply “work more hours” in order to increase profit will not be considered a significant factor in establishing the independent contractor status. Rather, a worker who has flexibility as to which jobs to perform, to advertise for customers, recruit support staff and solicit clients is more likely an independent contractor under this factor.
- As to the “relative investment” factor, the Guidance notes that the independent contractor must make some investment in order for there to be an indication of an independent business. If this occurs, the real inquiry is the relative nature of the investment by the worker. By way of an example, a cleaning services company hires a cleaning worker who signs an independent contractor agreement. The cleaning company provides that worker with insurance, a vehicle to use, and all equipment and supplies. The company also invests in advertising and finding clients. If the only investment put forth by the worker is his occasional investment of his own preferred cleaning supplies, the relative investment by the worker compared to the employer is quite low. As such, this scenario suggests an employee classification. The ultimate question on this factor is whether the worker’s investment indicates a risk of real loss, or is the worker economically dependent upon the employer.
- In terms of “special skills,” the presence of specialized skills does not automatically weigh in favor of independent contractor classification. For example, the technical skills of cable installers, carpenters, construction workers, and electricians, for example, even assuming they are special, are not determinative. Instead, the DOL’s focus will be on whether those specialized skills allow the worker to operate with economic independence.
- As to the nature of the relationship (permanent or indefinite), the Guidance notes that an independent contractor is typically found if the status is “temporary,” whereas employee classification is inferred from permanency. The Guidance rejects this traditional theory. DOL asserts that a lack of permanence should be carefully reviewed “to determine if the reason [or its lack] is indicative of the worker’s independent business.” Borrowing from a Second Circuit opinion,[5] the Guidance states that “[t]he key is whether the lack of permanence or indefiniteness is due to ‘operational characteristics intrinsic to the industry’ (for example, employers who hire part-time workers or use staffing agencies).”
- The final factor analyzed and often emphasized is the nature and degree of the employer’s control. Given technological advances, the DOL notes many employers have been tempted to engage workers not as employees, yet maintain stringent control over the aspects of their jobs such as their schedules and assigning specific tasks to be performed. Despite these advances which might paint a picture that workers are “independent,” the Guidance advises a more careful inquiry to determine the degree to which the worker is economically dependent on the employer.
Conclusion and Takeaways
This Guidance is the latest reminder that the DOL is aggressively pursuing an attack on what it perceives to be broad-based misclassification of workers as independent contractors. DOL’s position is that most workers should be treated as “employees” under the FLSA. The Guidance emphasizes an expansive reading of the FLSA’s definition of “to employ,” as well as its decision to focus on the “economic reality” of the relationship will make DOL investigations much more exacting. For employers in Virginia, West Virginia and North Carolina who use independent contractors, now is the time to review, and possibly revise, their agreements and to evaluate arrangements to ensure compliance. Transitioning workers from an independent contractor arrangement to an employment relationship must be handled carefully. If you have questions, please contact the members of the Gentry Locke Labor & Employment team.
[1] See e.g, Senator Warner Addresses the Opportunities and Challenges of the ‘Sharing Economy’, Official website of Senator Mark R. Warner, available at https://www.warner.senate.gov/public/index.cfm?p=gig-economy .
[2] These factors are often called the “Silk factors” in reference to United States v. Silk, 331 U.S. 704 (1947), the Supreme Court case from which they derive.
[3] In Virginia, employers are also subject to Virginia Department of Labor and Industry (DOLI) regulations. As of July 1, 2015, DOLI implemented a new policy to combat misclassification of workers. DOLI uses a “seven factor” test in determining the classification of workers which differs slightly from the Fourth Circuit and this Guidance.
[4] Schultz v. Capital Int’l Sec., Inc., 466 F.3d 298, 305 (4th Cir. 2006).
[5] Brock v. Superior Care, Inc., 840 F.2d 1054, 160-61 (2d Cir. 1988).
Tuesday, August 4th, 2015
Workplace accidents can be a frightening prospect for a business. You may have made your workplace as safe as possible, your employees may be highly trained, and you may have all the right insurance. But accidents happen.
Workplace accidents will affect your employees and your business, whether through lost time, payments for medical care, or the simple human stress reaction that affects everyone—management as well as labor—involved with an accident. Moreover, there are a number of statutory and contractual requirements arising out of workplace accidents with which businesses must immediately comply.
In short, handling a workplace accident means both protecting your employees and protecting your business. Thus, it pays to be prepared to swiftly handle such accidents by taking immediate action to make sure both your employees and your business fully recover.
First Steps: protecting your employees
As soon as you learn of an accident, your first actions must be to take care of your injured employee. Evaluate the scene, provide initial comfort and assistance (training yourself and your employees on CPR is recommended for situations like this), and call 911 if necessary. Something that businesses often forget after the initial rush of assisting injured employees is making sure other employees are safe and provided for. If they were witnesses to the accident, depending on its severity, they may need comfort and counseling of their own.
Even if 911 is not necessary, the injured employee may still require medical attention quickly. Your workers’ compensation insurance carrier should have already provided you with a list of three or more physicians to offer injured employees. (This satisfies the employer’s initial duty under Virginia Code § 65.2-603(A)(1) to provide the employee with a “panel” of physicians.) The employee should pick one of the physicians offered.
If your carrier has not provided you with such a list, contact your carrier and obtain one. If, under your workers’ compensation insurance policy, you are responsible for procuring your own panel of physicians—possibly due to a large self-insured retention or a high deductible—the workers’ compensation professionals at Gentry Locke can assist you with compiling the best physician panel for your business. Keep in mind that it is often advisable to provide initial transportation to the panel doctor chosen by the injured employee.
Second steps: legal and insurance requirements (protecting your business)
After the initial rush of responding to an accident and protecting employees, businesses must still contend with an avalanche of legal requirements. Some of these requirements come from the Virginia Workers’ Compensation Act, while others are likely contained in your business’s workers’ compensation insurance policy.
As for the Act’s requirements for employers, it is likely that under your policy, your insurance carrier will comply with the Act on your behalf. Some requirements imposed by the Act include payment for medical treatment for the injured employee, filing a “First Report of Injury” with the Virginia Workers’ Compensation Commission, providing vocational rehabilitation services to the employee, and even making periodic workers’ compensation payments in lieu of salary. (Please keep in mind that this is nowhere near an exhaustive list of the Act’s requirements for employers.)
However, every insurance policy is different, and yours should be read and analyzed to understand what duties you have with regard to your insurance provider. Gentry Locke’s workers’ compensation lawyers can also assist you with this question. Regardless, it is almost certain that your business must: 1) report the accident to your carrier at your earliest possible opportunity; 2) cooperate with your carrier’s investigation of the accident; and 3) work with the defense attorneys hired by your carrier, if some aspect of the compensability of the accident is disputed.
Finally, an aspect of workplace accidents too often overlooked by business owners is the potential for OSHA investigations and fines. As far as government regulators are concerned, workplace accidents and OSHA investigations go together like peanut butter and jelly. Fortunately, Gentry Locke’s OSHA & Workplace Safety team stands ready to assist your business with the thorny issues of handling OSHA investigations and helping to prevent or lower fines.
Monday, July 6th, 2015
Nicole Poltash joined Gentry Locke’s Construction group in December of 2014. She contributes to two blogs, Virginia Construction Law Update at www.VAConstructionLawUpdate.com, and Virginia OSHA Law News at www.VaOSHALawNews.com.
Attorneys often pride themselves on being objective—on being able to see both sides of the story and then adamantly argue for that side which is their client’s. Of course, there are also two sides to practicing in each area of the law. Below are some of the dual lessons I have learned since joining the legal profession as a construction lawyer at Gentry Locke.
Know Thy Client.
Clients in the construction industry, such as general contractors, are smart people. In fact, many of them are self-made businesspeople. On the one hand, this means they understand that it is usually financially smarter to settle a case, so litigation-lovers like myself will rarely see the inside of a courtroom. On the other hand, your clients are more likely to understand and heed your advice about following a particular course of legal action. Bonus: if you ever want to renovate your house, you can quickly get a solid list of references.
Be Patient.
If your law school was like mine, courses in construction law did not exist. Although classes like contracts or secured transactions may be helpful, you will pretty much be starting from scratch. It’s also a slow process — ten months later I feel almost as inexperienced as my first day. Bottom line: becoming well versed in this practice area will take a very, very long time, but it also means that you will remain intellectually challenged. And there’s that whole job security thing.
Carve Out a Niche.
This market is both saturated and male-dominated (read: the women’s line for the restroom is always shorter than the men’s), which can be quite intimidating. For example, I am the only construction lawyer at my firm who is female and who has less than ten years of experience. To eventually build a book of business, you need to stand out. This can entail getting involved in a particular trade association or developing a gift for filing those tedious mechanic’s liens. I also highly recommend taking advantage of any mentorship opportunities at your firm.
While lawyers may be restricted to practicing law in those states in which they are licensed, the beauty of our profession is that we can explore different practice areas. If you are interested in construction law, try it! Though a tougher area to crack, it is well worth the effort.
Tuesday, June 30th, 2015
Birchwood-Manassas Assocs., LLC v. Birchwood at Oak Knoll Farm, LLC
“Equity aids the vigilant, not those who sleep on their rights.”
The Supreme Court of Virginia affirmed this oft-stated maxim in Birchwood-Manassas Assocs., LLC v. Birchwood at Oak Knoll Farm, LLC, No. 141195, 2015 Va. LEXIS 76 (Va. June 4, 2015). There, the Court held that equitable tolling was not available, because neither manager conflicts of interest nor alleged breaches of fiduciary duty constitute an “extraordinary circumstance.”
Although it did not involve a piercing the corporate veil claim, Birchwood-Manassas will likely be cited in future discussions about this “extraordinary exception” in Virginia law.
Birchwood-Manassas Associates LLC (“Birchwood-Manassas”) was formed to own, develop, and sell real estate. Ronald J. Horowitz and Burton Haims were Birchwood-Manassas’s managers, with Horowitz exercising day-to-day control. In addition, two related entities were formed to develop and sell real estate under Horowitz and Haims’ management and control—Birchwood at Oak Knoll Farm (“Oak Knoll”) and Birchwood at Wading River (“Wading River”). Horowitz likewise exercised day-to-day control over Oak Knoll and Wading River.
Between 2004 and 2009, Horowitz and Haims transferred funds from Birchwood-Manassas to Oak Knoll and Wading River. While these transactions and subsequent repayments were recorded by all three entities, there were no loan documents or formal repayment terms. This created demand obligations owed by Oak Knoll and Wading River in favor of Birchwood-Manassas.
In 2011, a non-managing member of Birchwood-Manassas filed suit for the company’s judicial dissolution. The circuit court found that dissolution was proper and appointed a liquidating trustee. As part of its order showing why a liquidating trustee was appropriate, the circuit court found that there was an irreconcilable conflict between Birchwood-Manassas’s managers—Horowitz and Haims—and the companies to which Birchwood-Manassas had lent money—Oak Knoll and Wading River.
In early 2013, the liquidating trustee demanded that Oak Knoll and Wading River repay the borrowed money. Birchwood-Manassas then filed suit against the companies, seeking breach of contract and unjust enrichment damages, as well as a constructive trust. It also alleged numerous breaches of fiduciary duties by Horowitz and Haims.
In a plea in bar, Oak Koll and Wading River asserted that all claims—which the parties agreed each had a three-year statute of limitations—were time-barred. Birchwood-Manassas responded that the limitations periods had been equitably tolled, because it was impossible for Birchwood-Manassas to have brought a claim within the limitations period, due to Horowitz and Haims’ irrevocable conflicts of interest and alleged breaches of their fiduciary duties. The circuit court granted the plea in bar, dismissing Birchwood-Manassas’s suit with prejudice.
The Supreme Court of Virginia affirmed. It observed that, in general, statutes of limitations are strictly enforced, and that equitable tolling is only available in “extraordinary circumstances.” Such circumstances had previously been confined to fraud or affirmative acts by the defendant that hindered assertion of the claim, and the Court declined to extend the grounds for equitable tolling.
In essence, the Court held that even if Birchwood-Manassas’s managers were conflicted or had breached their fiduciary duties, it was not impossible for the company to have timely filed claims based on the managers’ conduct. It reasoned that the company could still have vindicated its rights within the limitations periods, through a member-initiated derivative action.
A derivative action is the company’s lawsuit, albeit filed and maintained by its members (or shareholders in the corporation context). The right to file derivative claims is defined by statute. The Birchwood-Manassas court found that a derivative action could have been filed, particularly in light of the member-initiated dissolution action that had led to the trustee’s appointment.
Birchwood-Manassas thus requires non-managing owners to be vigilant against possible corporate malfeasance as it transpires. Absent fraud or affirmative acts, “the company” must bring suit within the limitations period, either directly or derivatively.
Finally, Birchwood-Manassas may have utility in the piercing the corporate veil context. In Virginia, veil-piercing is an “extraordinary exception” Dana v. 313 Freemason, A Condo. Ass’n, 266 Va. 491, 502, 587 S.E.2d 548, 554 (Va. 2003). As part of its reasoning, the Birchwood-Manassas court commented that “[a]ffiliated entities having overlapping management and the occurrence of transactions between such entities are not extraordinary occurrences.” (emphasis added). With this statement of what—standing alone—is not “extraordinary,” Birchwood-Manassas will likely be used to argue against veil-piercing claims in the future.
Wednesday, June 17th, 2015
Cate Huff contributes to the “Virginia Hospitality Law” blog. You can read this article and others at VaHospitalityLaw.com.
On June 4, 2015, the Virginia Supreme Court held a circuit court erred in excluding evidence of an employee’s work history and quality of past job performance in determining future lost income. The Supreme Court also reversed the circuit court’s denial of a corporate employer’s motion to strike the employee’s punitive damages claim.
A former diesel mechanic filed suit against his supervisor and company for malicious prosecution and defamation. Following a jury trial, the jury awarded the employee significant compensatory and punitive damages against both the supervisor and the company.
Filing separate appeals, the supervisor and company both argued that the circuit court committed error when it excluded evidence of the employee’s work history and the quality of his past job performance. The Court reversed and held that such evidence is probative of the employee’s claimed damages, as the employee sought damages for future lost income and loss of earning capacity. In so ruling, the Court disagreed with the employee’s arguments that the evidence was more prejudicial than probative and was duplicative of other evidence introduced at trial.
The company also appealed the court’s denial of its motion to strike the employee’s punitive damages claims. The employee argued a company can only act through its agent, so any employee’s action is the company’s action for purposes of punitives. The Court reversed the circuit court, finding the employee failed to present sufficient evidence to support a punitive damages claim against the company. In reversing, the Court distinguished punitive damages from compensatory damages, where a company can be held liable for its employees’ actions under a theory of respondeat superior. Punitive damages can be awarded against a corporate employer under only two scenarios: (1) the employer participated in the wrongful act giving rise to the punitive damages claim, or (2) the employer authorized or ratified the acts giving rise to the claim. The employee failed to provide sufficient evidence to support punitive damages under either scenario. Unfortunately for the supervisor, he failed to appeal the award of punitive damages against him, so the court had no jurisdiction to consider its validity.
While the Court did not disturb the jury’s liability finding or its award of compensatory damages, these cases are a win for employers, as an employee cannot prove a claim for punitive damages against a company by merely showing that a supervisor acted wrongfully.
Read the full Opinion here.
Wednesday, June 3rd, 2015
Coverage For “Residents” Of Your “Household” Under Personal Liability Insurance Policies
As this is written (June, 2015) it is high school graduation time. One phase of life is completed, and another begins. For many, the next stage involves “leaving the nest” – off to college, the military, an internship, maybe even a job, or perhaps the 2015 equivalent of hitchhiking Europe or following the Grateful Dead to discover the true meaning of life. In many instances, this involves “living” somewhere else, even if only for a temporary or indefinite period of time, but ultimately coming back “home” before deciding what to do with the rest of their lives.
What happens when, after embarking upon their adventures, they are involved in an automobile accident, or their dog bites the mailman, and a liability claim is asserted against them? When they were still in high school, you would report the matter to your auto or homeowners insurance carrier, and let the insurer deal with the situation. Does your child still have coverage once they have left home? Are you sure? Of the myriad of issues and decisions confronting a family at such times, insurance coverage is likely not at the top of the list. Unfortunately, waiting until a claim has been made is to determine whether your child is still covered under your liability insurance policies may be too late.
Personal liability insurance – the automobile and homeowners policies we buy to protect us from claims of negligence – are sold in “package” form. That is, coverage is usually purchased not just for one individual, but instead on a “family” basis.
One person, usually one of the owners of the home or vehicles in question, buys the policy and becomes the “named insured,” entitled to all of the benefits of coverage. However, for liability coverage those policies usually contain a definition of “insured” that covers not only the “named insured,” but also his or her “relatives,” provided they are “residents” of the named insured’s “household” at the time any claim arises. This is good, in that it affords coverage on an expansive basis without the necessity of listing every resident relative on the policy, but it gives rise to its own set of problems, in that such relatives can lose their coverage once they are no longer “residents” and “household,” and the definition of those terms have been the subject of considerable debate. See State Farm Mutual Automobile Insurance Co. v. Smith, 206 Va. 280, 285, 142 S.E.2d 562, 565-566 (1965) (The meaning of “resident” or “residence,” has been “a prolific source of litigation”). We predict that these problems will become more difficult, and frequent, in light of societal and demographic changes that have taken place over the past twenty-five years.
We have yet to encounter a policy in which these critical terms are defined. In absence of a specific definition, the Virginia courts will apply the “plain meaning” rule, in which the terms used therein are to be given their “ordinary and customary meaning.” Salzi v. Virginia Farm Bureau Mut. Ins. Co., 263 Va. 52, 556 S.E. 2d 758, 760 (2002). The term “relative” is relatively easy understand.[1] However, “[t]he meaning of ‘resident’ or ‘residence,’ [has been] a prolific source of litigation …”. State Farm Mutual Automobile Insurance Co. v. Smith, 206 Va. 280, 285, 142 S.E.2d 562, 565-566 (1965). The case law tells us that this term must be defined “in the context in which it is used” – “resident” of the named insured’s “household” – and that “[t]he word “household” denotes a settled status; a more settled or permanent status is indicated by “resident of the same household” than would be indicated by “resident of the same house or apartment.” Id. However, the real questions arise when the courts’ definition of “household” is examined.
The Supreme Court of Virginia has declared that “[t]he term ‘household’ embraces a collection of persons living together as a single group with one head under one roof, a unit of permanent and domestic character,” State Farm v. Furrow, 237 Va. 77, 80, 375 S.E. 2d 738, 740 (1989) (emphasis added), and a “collective body of persons living together within one curtilage, subsisting in, and directing their attention to a common object, the promotion of their mutual interests and social happiness. USAA v. Hensley, 251 Va. 177, 181, 465 S.E.2d 791, 794 (1996) (emphasis added). See also, Allstate Insurance Co. v. Patterson, 231, Va. 358, 344 S.E. 2d 890 (1986); Geico v. Allstate, 235 Va. 542, 369 S.E.2d 181 (1988). There would seem to be reason to question whether “ordinary” people applying the “plain meaning” of this word would think in terms of there being a single head to every “household” – an idea that would likely have been accepted without question by Jim Anderson (Robert Young’s character in the 1950s TV show Father Knows Best) or Ward Cleaver (father of Theodore “The Beaver” Cleaver in the 1960s show Leave It To Beaver) where the “father” was the unquestioned “head” of the family, but an idea that could trigger interesting discussions in today’s world as to whether families still have a single “head,” and if so, who it is. Likewise, the notion that anyone applying a “plain meaning” analysis today would use a word such as “curtilage” – or even know what the word means. (In 1987 the United States Supreme Court defined the word as “the area immediately surrounding a residence that ‘harbors the “intimate activity associated with the sanctity of a man’s home and the privacies of life.’” United States v. Dunn, 480 U.S. 294 (1987) (emphasis added)).
Fortunately, the courts have provided us with some more practical guidance. In State Farm Mut. Auto. Ins. v. Bowles, 2011 U.S. Dist. LEXIS 89953. 4-5 (W.D. Va. 2011), the court analyzed many of the past Virginia court decisions[2] and concluded that a number of “non-dispositive factors” should be considered, including the extent to which the person seeking coverage: (1) intends to be a permanent resident of the household; (2) has regular, versus erratic contacts with the household; (3) actually stays at the residence; (4) maintains a close, or strained relationship with other members of the household; (5) pays rent, board, or otherwise contributes to household expenses or maintenance; (6) keeps personal property at the residence; (7) receives substantial mail at the residence; and (8) maintains a room or other private space in the residence. The court further noted, “[t]he regularity and quality of contacts … are the most significant factors for determining residence in a household.”[3]
If these are indeed the controlling factors, it is probably true that this year’s class of high school graduates will likely remain “residents” of their parents’ “households” until there is some manifestation of intent, either expressly (by some declaration of intentions) or impliedly (by actions taken), to reside elsewhere. A child who goes to college, or any similar pursuit, but maintains a room at his or her parents’ house, intends to return there (or at least has no other planned residence) upon completion of that pursuit, and does not change address for purposes of drivers’ license, voter registration, taxes, etc., probably remains a resident of the household. However, a manifestation of intent to the contrary will result in a holding that the child is not a resident of the household, and therefore not an insured. See USAA v. Hensley, 251 Va. 177, 465 S.E.2d 791 (1996) (Child left parents’ home in Saudi Arabia and lived with relatives in Virginia while attending college. He had no intention of returning the Saudi Arabia, and the court concluded he was a resident of the U.S. relatives’ household, not that of his parents); Phelps v. State Farm, 245 Va. 1, 426 S.E.2d 484 (1993) (Daughter left mother’s household to attend college after being told by mother that, once she turned 18 she was “on her own. Daughter showed no intention of ever returning. Court found she was not a resident of her mother’s household). Once such an intent is manifested, consideration should be given to obtaining separate policies of insurance for that child.
We predict that this issue will be clarified but court decisions in the not too distant future. In the meantime, it is an issue that demands the attention of Virginia families. When it appears that the child has “left the nest,” it is time him or her to obtain their own liability coverage. Sure, insurance policies are not cheap, but the expense pales in comparison to a liability claim for which there is no coverage.
[1] There is potential for debate with respect to stepchildren or foster children, but most policies eliminate this concern by extending the definition of “insured” to include any person under the age of twenty-one who is a resident of the named insured’s household or in the care of the named insured.
[2] The cases cited by the court include: See Phelps v. State Farm Mut. Auto. Ins. Co., 245 Va. 1, 426 S.E.2d 484, 9 Va. Law Rep. 713 (1993); Allstate Ins. Co. v. Patterson, 231 Va. 358, 344 S.E.2d 890, 893 (1986); State Farm Mut. Auto Ins, Co, v. Smith, 206 Va. 280, 142 S.E.2d 562, 566 (Va. 1965) overruled on other grounds by State Farm v. Jones, 238 Va. 467, 383 S.E.2d 734, 6 Va. Law Rep. 624 (Va. 1989); Farmers Insurance Exchange v. Saunders, 78 Va. Cir. 74 (2008); Dawson v. Auto-Owners Ins. Co., 2008 U.S. Dist. LEXIS 33571, 2008 WL 1836506, at *4 (W.D. Va. Apr. 23, 2008).
[3] Interestingly, age is not listed as a factor. There is no reason why a “child” cannot remain a resident of the parents’ household at any age.
Tuesday, May 12th, 2015
Recently, litigants have been relying heavily on Virginia Code Section 8.01-271.1 to shift their legal expenses to the opposing party. Code Section 8.01-271.1 is generally known as Virginia’s “good faith” statute and requires that all pleadings, motions, or other papers filed during litigation are filed for a proper purpose, be well grounded in fact, warranted by existing law, or a good faith argument to extend, modify or reverse existing law. If motions, including oral motions, are made in violation of this statute, a court has discretion to award any appropriate penalty including the fees incurred in responding to a motion. Given the amount of sanctions awarded in some cases recently (several hundred thousands of dollars), it appears that many litigants wait until the end of a case to raise sanctionable conduct and ask the court for reimbursement of practically all fees and expenses incurred in a case by arguing that the entire case was sanctionable as opposed to a narrow, discrete issue. A recent Virginia Supreme Court case, however, may be a reason to rethink this strategy.
In EE Mart F.C., L.L.C. v. Delyon, et al., 768 S.E.2d 430 (Va. 2015), the Supreme Court was asked yet again to determine the appropriateness of a sanction imposed pursuant to Virginia Code Section 8.01-271.1. Unlike most cases involving a sanctions appeal, EE Mart raised the issue of whether a Virginia court could sanction a litigant for actions that occurred in other courts and in other states. The long history of the cases dated back to 2010 when EE Mart filed, and later nonsuited, a case in Fairfax County against various parties (“Delyon”). In October 2011, EE Mart filed a case in a Maryland circuit court which was then removed to federal court. EE Mart sought to bring in Delyon to keep the case in federal court, but the federal court remanded the case to Maryland. In June 2012, Delyon filed suit against EE Mart in Fairfax County. EE Mart filed a counterclaim which gave rise to a sanctions motion “on the grounds that the assertions in the counterclaim were frivolous and based on false statements.” The Fairfax Court later ruled that EE Mart abandoned its counterclaim and, upon motion by Delyon, awarded sanctions against EE Mart. The sanctions included the costs incurred in the present case, as well as those from the 2010 Fairfax case and the Maryland case. EE Mart appealed. The Supreme Court held that the award of sanctions for costs incurred in actions outside of the instant case (the one Delyon filed against EE Mart) was error. The Court made clear that the plain language of Code Section 8.01-271.1 precludes an “award of attorney’s fees or expenses for actions that occurred prior to the sanctionable act.” While other actions may be relevant to determine whether sanctions are warranted, other actions in other states made before the sanctionable act in Virginia cannot include “attorney’s fees incurred for a filing or motion made elsewhere.”
It seems that the most practical application of this case is to bring sanctionable actions to the attention of a court in a timely manner. Failure to do so may result in a waiver of the ability to recover for that conduct.
This is especially true if all or part of the litigation takes places in different jurisdictions. If you or your client become the target of a sanctions motion, EE Mart may create a way to successfully assert that the other party waived the ability to recover for sanctionable conduct by not timely bringing the misconduct before the Court’s attention. This may have the end result in the amount of sanctions being reduced or the Court may choose not to impose any penalty.
Tuesday, May 5th, 2015
Gentry Locke Partner Todd Leeson is an associate member of the National Association of College and University Attorneys. He has represented private colleges in Virginia on employment law and student conduct issues (including Title IX sexual misconduct matters) for almost 20 years. Todd appreciates the work of Brad Tobias, a former associate at Gentry Locke, who assisted in the compilation of this article.
As the Virginia General Assembly convened in early 2015, there were high profile tragedies and stories regarding the important topic of protecting our college students from sexual assaults. Hannah Graham, a 19 year old student at UVA was murdered in the fall of 2014 after disappearing from the Downtown Mall in Charlottesville. The man charged with her murder, Jesse Matthew, had been accused of sexual assaults at two other colleges in Virginia and had left those schools shortly after each allegation. Moreover, in November 2014, Rolling Stone published an explosive article entitled “A Rape on Campus,” that focused upon an alleged gang rape of a UVA student at a fraternity. The article was subsequently discredited. Nevertheless, the General Assembly concluded that it was necessary to take additional steps to protect college students in Virginia. This article summarizes two of the new laws in Virginia that will take effect July 1, 2015.
Notations on Transcripts in Sexual Violence Cases (Va. Code § 23-9.2:15)
S.B. 1193 is entitled “Academic transcripts; suspension, permanent dismissal, or withdrawal from institution.” The law will require that registrars of higher education institutions in Virginia place a prominent notation on the academic transcript of each student who has been suspended for, permanently dismissed for, or who withdraws while under investigation for an offense involving sexual violence.
Once this notation is placed on the offending student’s transcript, colleges will be required to notify the student of the notation, and adopt a procedure for removing the notation if the student is subsequently found not to have committed the offense. In addition, if a student is suspended and completes the term and conditions of the suspension and is determined to be in good standing, the college shall remove the notation.
New Reporting Requirements for Acts of Sexual Violence (Va. Code § 23-9:15 and § 23-9:16)
The Virginia House of Delegates and Senate also unanimously passed identical bills, H.B. 1930 and S.B. 712, that establish reporting requirements applicable to certain College officials as to alleged acts of sexual violence.
Reporting Obligation of “Responsible Employees” of College
Certain exceptions are made for university employees who obtained the information through any communication considered “privileged” under state or federal law or the employee received the information in the course of providing services as a licensed health care professional, a professional counselor, campus victim support personnel, a clergy member or an attorney. Additionally, no employee is required to inform the Title IX coordinator of the alleged acts of sexual assault if he or she has actual knowledge that the same information has already been reported to the Title IX coordinator, the Commonwealth Attorney or the law enforcement agency responsible for investigating the alleged act of sexual violence.
The first obligation applies to a person deemed a “responsible employee” of the college. The law uses the same definition that the Federal Office of Civil Rights uses for Title IX sexual violence cases. Once a “responsible employee” obtains information that an act of sexual violence may have been committed, he must report it to the Title IX coordinator “as soon as practicable” after addressing the immediate needs of the victim.
Reporting Obligation of Title IX coordinator to “review committee”
The Title IX coordinator (or designee) in turn is required to “promptly report” the information, including any personally identifiable information, to a “review committee.” The review committee must consist of at least three or more persons including the Title IX coordinator or designee, a law enforcement representative and a student affairs representative. The review committee may be the “threat assessment team” established under Va. Code 23-9.2:10 or a separate body.
Reporting Obligation and Function of “review committee”
The review committee is required to meet within 72 hours of receiving the Title IX coordinator’s report, and thereafter as necessary. The committee has the power to obtain law-enforcement records, criminal history records, health records, available institutional conduct or personnel records and information or evidence known to the institution or law enforcement.
The review committee (or the representative of law enforcement if the committee does not reach a consensus) must determine if disclosure of the information, including personally identifiable information, is necessary to protect the health and safety of the student or other individuals. If so, the law enforcement representative shall “immediately” disclose such information to the responsible law-enforcement agency. In addition, the Title IX coordinator or designee shall notify the victim is such a disclosure is made.
As to alleged acts of sexual violence that would constitute a felony under Virginia law, the law enforcement representative on the committee will be imposed with the duty to consult with the local Commonwealth’s attorney and provide him or her with the information received by the review committee without disclosing personally identifiable information. Putting further burden on the committee, the bill provides that if the law-enforcement representative does not think that alleged acts constitute a felony, yet other members of the committee individually do, then it is that person’s duty to provide the same information within 24 hours to the Commonwealth’s Attorney.
Protocol After of Review Committee Determination
After the review committee makes its determinations discussed above, its work is done as to that particular report. However, the Title IX coordinator and the law enforcement representative shall each retain the authority to proceed with any further investigation or adjudication allowed under federal or state law. Similarly, both retain the right to keep and maintain independent records of the committee’s considerations.
Information that colleges must provide to a victim of an alleged act of sexual violence
The new law also requires the institution to ensure that a victim of an alleged act of sexual violence is informed of the following eight matters:
- Available law-enforcement options
- Importance of collection and preservation of evidence
- Available options for a protective order
- Available campus options for investigation and adjudication
- Right to participate or decline to participate in any investigation under applicable law
- Applicable federal or state confidentiality provisions
- Available on-campus resources and any unaffiliated community resources (e.g., sexual assault crisis centers, domestic violence crisis centers, or other victim-support services)
- Importance of seeking appropriate medical attention.
Memorandum of Understanding (MOU) with Appropriate Community Resources
Another provision of the new law will require universities in Virginia to establish written agreements with local sexual assault crisis centers or other victim support services that are aimed at providing sexual assault victims with immediate access to a confidential, independent advocacy services. Universities will be required to disseminate these agreements promoting access to victim services through adopted university-wide policies.
The law also includes language that under this new Virginia law, a person who is the victim of an alleged act of sexual violence is not required to report such violation.
Final Thoughts[1]
As noted, the General Assembly and Governor felt it was important to take steps to protect college students as to campus sexual assaults. These new requirements are in addition to existing mandates and pronouncements of the Federal Government, especially the Office of Civil Rights (OCR) regarding laws including Title IX, as well as the Violence Against Women Reauthorization Act of 2013 (VAWA) and its new Section 304 Regulations that also take effect on July 1, 2015. Please let us know if you have further questions about the new Virginia laws, or the existing Federal requirements, as to campus sexual assaults.
[1] HB 1785 is another new law that imposes obligations upon colleges. Among other things, colleges will be required to enter into mutual aid agreements and/or to notify the local commonwealth’s attorney within 48 hours of beginning any investigation involving an alleged felony criminal sexual assault. This will be part of Va. Code 23-234
Monday, April 20th, 2015
Back in the old days (actually less than 10 years ago), most of your company’s important documents and communications were stored in a file cabinet. When your company became involved in a lawsuit and you needed to gather information, you would simply pull the relevant file folders, copy the contents and then provide those materials to your attorney.
Technology has changed everything. These days, more and more information that used to be found in a file cabinet is stored electronically. No hard copies exist.
Welcome to the world of e-discovery. E-discovery is the process of collecting, analyzing, and exchanging electronic data during litigation or as part of a government investigation.
Even for a small company, the e-discovery process can be extremely time-consuming and very expensive. Think about all of the e-mails, text messages, instant messages, voice messages, etc. that may be relevant to an issue in dispute.
A little bit of upfront planning can significantly limit the time and expense associated with e-discovery. A good information retention policy is a necessity. It is also important for someone at your company to be familiar with litigation hold guidelines as well as the process of preserving and collecting electronic data. It is essential that these matters be addressed prior to your company becoming involved in litigation or being the target of a government investigation.
For more information, refer to our Electronic Discovery & Document Management website page, or contact a Gentry Locke attorney to help prepare your company for the challenges of e-discovery.
Friday, April 17th, 2015
As anticipated, Governor McAuliffe has signed House Bill 2081. As described in our previous article, as of July 1, 2015, the right of employers in Virginia to access personal social media accounts of employees and job applicants will be restricted. Virginia now joins 18 other states with workplace social media login and password privacy laws.
It will be important for employers to understand the limits this new law will impose, and to be sure steps are taken prior to July 1 to change policies and practices that may not be consistent with the new law.
Should you have questions regarding this new law, please contact David Paxton at Paxton@gentrylocke.com (540.983.9334), or any member of the Employment Law team at Gentry Locke.
