Employers Face Significant Challenges Complying With the ADA Amendments Act

Tuesday, July 17th, 2012

This article appeared in the Summer/Fall 2012 issue of “Virginia Human Resources Today” magazine.

Are you aware of the dramatic developments within the last year as a result of the ADA Amendments Act of 2008 (“ADAAA”)? If not, read on!

In amending the ADA, Congress expressed its view that the definition as to whether a person was “disabled” was being interpreted too narrowly and that persons with impairments such as cancer, diabetes and epilepsy, to name a few, were being improperly denied protection under the law. The ADAAA states that the definition of disability should be interpreted broadly in favor of coverage. In March 2011, the EEOC published final regulations regarding the ADAAA. The EEOC lists dozens of specific medical impairments that it opines should “easily” be found to “substantially limit” a major life activity and would therefore be considered a “disability” under the ADAAA. 29 C.F.R. § 1630.2(j)(3)(iii).

The EEOC’s most recent ADA statistics are telling. Last year there were almost 26,000 ADA charges filed; more than 1 out of every 4 charges now allege an ADA violation. More significantly, last year the EEOC recovered over $103 million for ADA claims, which continues a trend of sharp increases over the last few years.

There are many important developments as to an employer’s obligations as under the ADAAA. This article only touches on a couple key issues.

Expansion of Medical Impairments Covered as “Disabilities.” The EEOC is aggressively testing the boundaries of the new law in court. While employers should still seek appropriate medical documentation from an employee who seeks an accommodation based on a purported mental or physical impairment, employers should focus more attention as to the specific accommodation that the employee seeks so that the employer can determine whether the request is reasonable and/or necessary (or would constitute an undue hardship). Stated another way, future cases will place more emphasis on the employer’s actions and conduct, not a plaintiff’s health.

Additional Leave as a Reasonable Accommodation and “Inflexible” Leave Policies. What should an employer do with an employee who does not have FMLA leave, or has exhausted his available leave, but who requests additional leave from work based on a purported medical impairment? This question continues to pose major challenges for employers. Moreover, the EEOC will not hesitate to litigate cases in which employers apply “inflexible” leave or attendance policies. (Search the terms “EEOC” and either “Verizon,” “Sears” or “Supervalu” to see a few of the EEOC’s results on this topic.) While an employer is not obligated to grant an indefinite leave, it is difficult to determine where to draw the line. Whenever an employee seeks leave, continued leave or a modification of a work rule due to a medical condition, employers must evaluate the request on an individual basis, maintain good documentation, and ensure that they are not acting on the basis of a rigid policy.

Trademark Registration: What Every Corporate Counsel Needs to Know

Monday, August 16th, 2010

This article, written by Virginia attorney David N. Cohan, was originally published in the Intellectual Property & Technology Law Journal and is reprinted with permission of Aspen Publishers.

To read the article as published, click here or via the link under Additional Reading.

Have You Made A Last-Ditch, Desperate, and Disingenuous Attempt to Subvert the Legal Process Today?

Tuesday, January 6th, 2009

This article was co-authored by Gentry Locke attorney Travis Graham, and in 2009 was published in Virginia Lawyer Magazine. To download the article from the VSB site in PDF format, click here.

It has been a long time since we’ve been wrong about anything. It has been even longer since we were incorrect, and together we cannot remember the last time that we misread a case. This is not to say that either of us is especially smart or perceptive. It’s just that, over the past few years, we’ve noticed a trend in the language we see in briefs and pleadings. We’ve somehow gone from being “wrong” to being “absurd,” “ridiculous,” and “disingenuous,” “myopic” in our view of the world, and “prone to wild exaggeration.” Now, instead of just being “incorrect,” we’re “hopeless”—we “engage in subterfuge,” “obfuscate the facts,” “muddy the water,” “employ a selective memory,” “conveniently forget” facts in the record, and generally spend all day trying to “pull the wool over the court’s eyes.” Our pleadings “smack of desperation” and serve as gross “admissions of failure.” Opponents call us on our “scurrilous allegations,” which are, sadly, “as baseless as they are preposterous.” We have made many an “eleventh-hour attempt” to do this or that on the basis of distorted facts, all to divert focus or mislead the court. We weave arguments out of “whole cloth,” and most everything we do these days is “transparent,” “desperate,” “last-ditch,” or amounts to an “about-face” of one kind or another. The pleadings telling us so are filled with so much underlining, bold print, and capitalization that they are basically black.

From our conversations with practitioners and judges, we know that we are not alone in noticing—and resenting—a trend toward the increased use of inflammatory language in pleadings. Everyone with whom we’ve spoken agrees that letters, pleadings, and briefs laced with attack and insult make life a little worse for all of us. We all understand that accusing someone of being “disingenuous” or describing opposing counsel’s position as a “pretext” is just an elegant way of calling another lawyer a liar. No one seriously contends that this language serves a useful purpose in the practice of law.

But you don’t have to take our word for it. Over the past few months, we’ve conducted research and engaged in discussions with a number of judges and justices on the subject of civility in pleadings. The results were enlightening. Based on our investigation, we offer two good reasons—neither remotely disingenuous—to leave the anger out of your court documents: first, it’s against the law, and second, it absolutely does not work.

1. It’s against the law.

a. The Principles of Professionalism for Virginia Lawyers

The Principles of Professionalism for Virginia Lawyers are a set of ideals endorsed by both the Supreme Court of Virginia and the Virginia Bar Association. The preamble to the Principles reminds us that in our oath, “all Virginia lawyers pledge to demean themselves professionally and courteously.” The Principles go on to instruct us to “treat everyone as [we] want to be treated—with respect and courtesy,” act toward clients with “respect and courtesy,” “treat all judges and court personnel with respect and courtesy,” and “treat both opposing counsel and their staff with respect and courtesy.”

We are further cautioned to “avoid ad hominem attacks, recognizing that in nearly every situation opposing lawyers are simply serving their clients as [we are] trying to serve [our] clients,” to “avoid reciprocating unprofessional conduct by opposing counsel,” and “to resist being affected by any ill feelings opposing clients may have toward each other, remembering that any conflict is between the clients and not between the lawyers.” While these principles lack the force of rules or law, they provide a clear statement that our profession does not approve of discourteous conduct, including written insult.

b. The Virginia Rules of Professional Conduct

Rule 3.4 of the Virginia Rules of Professional Conduct, which deals with fairness to opposing parties and counsel, provides that a lawyer shall not “intentionally or habitually violate any established rule of procedure or of evidence, where such conduct is disruptive of the proceedings,” and that a lawyer shall not “file a suit, initiate criminal charges, assert a position, conduct a defense, delay a trial, or take other action on behalf of the client when the lawyer knows or when it is obvious that such action would serve merely to harass or maliciously injure another.” Admittedly, these provisions do not explicitly command lawyers to avoid inflammatory language in written documents. But Comment 8 to the rule states that

in adversary proceedings, clients are litigants and though ill feeling may exist between the clients, such ill feelings should not influence a lawyer’s conduct, attitude, or demeanor towards opposing counsel. A lawyer should not make unfair or derogatory personal reference to opposing counsel. Haranguing and offensive tactics by lawyers interfere with the orderly administration of justice and have no proper place in our legal system.

It would seem that the drafters of the rule contemplate that “fairness” to opposing counsel necessarily includes an element of courtesy.

Oddly, Virginia has not adopted another rule, which appears in the ABA Model Rules and has been held by courts to directly address intemperate language in written documents. ABA Model Rule 8.4(d) provides that a lawyer shall not “engage in conduct that is prejudicial to the administration of justice.” While this is a broad pronouncement, courts have held that the provision subjects a lawyer to discipline for the use of “offensive and sarcastic language.”[1] The comment to Virginia Rule 8.4 provides no indication as to why the Virginia rule omits this subsection. The omission seems to eliminate one means of redressing intemperate and offensive language in written documents.

c. Virginia Code Section 8.01-271.1

Virginia law, however, does provide a means by which the courts may sanction intemperate language, at least when that language is directed to the courts themselves. Virginia Code § 8.01-271.1, Virginia’s equivalent to Federal Rule 11, has been held by our Supreme Court to prohibit offensive writing directed at a tribunal. In Taboada v. Daly Seven, Inc.,[2] the court responded to a petition for rehearing that contained several very clear instances of what it termed “intemperate language.” The court found that the language was intended “to ridicule and deride the court,” which it held to be an “improper purpose” for a pleading within the meaning of Code § 8.01-271.1(iii).[3] The filing attorney was sanctioned accordingly.

More recently, the Supreme Court of Virginia upheld sanctions imposed by a circuit court for the use of contemptuous language in a pleading. The Court agreed that a pleading containing such language was filed for an improper purpose within the meaning of Code § 8.01-271.1(iii). It stated that “[c]ontemptuous language and distorted representations in a pleading never serve a proper purpose. . . .”[4] In both cases, the Supreme Court of Virginia reminded practitioners that Code § 8.07-271.1(iii) “is designed to ensure dignity and decorum in the judicial process,” and that it “deters abuse of the legal process and fosters and promotes public confidence and respect for the rule of law.”[5]

Taken together, these principles, rules and laws make it clear that inflammatory language for its own sake is improper.

2. It doesn’t work.

a. Intemperate language is not effective advocacy.

There is a second, and perhaps even more powerful, reason to leave the loaded language out of your court documents: it simply does not work. In the course of preparing this article, we spoke with a number of sitting judges and justices. Without exception, they felt that the use of inflammatory language is hopelessly ineffective as a persuasive technique—and some found it to be affirmatively counterproductive. Justice Lawrence L. Koontz, Jr. of the Supreme Court of Virginia summarized the general consensus when he told us, “I can’t think of a reason why a lawyer would take that approach.” He finds it disturbing to see inflammatory language in briefs, and sometimes wonders what has happened to the concept of courtesy, which he says, “ought to be as natural as breathing.”[6]

This makes perfect sense. Judges are trying to do a job—specifically, they are trying to arrive at the legally correct result in a given case. The proper purpose of a brief or pleading is to help the judge arrive at this result. Careful legal analysis and an accurate recitation of the material facts will aid the judge; invective will not. Accordingly, as Justice Koontz told us, “[a] strong brief is based on analysis, and application of the facts to the law,” while inflammatory language is “not effective and is at minimum a distraction.”[7]

Further, the judges all stressed that their time is extremely limited and jealously guarded. One state-court trial judge told us in no uncertain terms that “[f]or a judge, time is the most valuable commodity. . . . Lawyers who wish to waste the time of the court—for which their clients are paying—to no useful end are a scourge on the profession.”[8] Overstating the facts or law or engaging in ad hominem attack wastes time that the court could be using to analyze the issues. Michael Urbanski, a federal Magistrate Judge for the Western District of Virginia, agreed that shrill language “gets in the way. . . . It’s annoying, it’s distracting, and it wastes the client’s money.”[9]

In fact, the best treatment that an overly aggressive lawyer can hope for is to be ignored. Judge Martin F. Clark, Jr. of the Twenty-First Judicial Circuit told us that he finds overblown language in pleadings to be so pervasive that it does not even register anymore; he characterizes it as “stagecraft.”[10]

Because judges have limited time to devote to your case, anything that you write that does not affirmatively advance your client’s position necessarily hurts it.[11] Superfluous language dilutes the force of your arguments, and increases your risk of error. Error, in turn, will erode your credibility and your effectiveness as an advocate. Further, an unending stream of angry rhetoric tries the patience of the average judge; it gets on their nerves the same as yours and mine. Judge Clifford R. Weckstein of the Twenty-Third Judicial Circuit invoked Judge Alley’s classic cry of disapprobation: “If there is a Hell to which disputatious, uncivil, vituperative lawyers go, let it be one in which the damned are eternally locked in discovery disputes with other lawyers of equally repugnant attributes.”[12]

b. Inflammatory language signals a weakness in the underlying argument.

Inflammatory language is not only annoying and distracting to the judge, but as several jurists told us, it signals weakness in the underlying legal argument.[13] Justice Koontz noted that when the justices see certain language, “it’s an indication that counsel does not think his or her case is strong on the facts and the law.”[14] As Judge Weckstein phrased it, “the judge assumes that if you have the goods, you will go with the goods instead of resorting to smoke and mirrors.”[15]

Even though judges may be inured to a certain degree of hyperbole, some words indicate deficiencies in the underlying argument so strongly that they will likely prompt questioning from the court.[16] Justice Donald W. Lemons of the Supreme Court of Virginia offered some examples of phrases that particularly catch his attention, and not in a good way:

• A statement that an opponent is “disingenuous;”
• A claim that an opponent’s position is merely a “pretext;”
• An assertion that opposing counsel “would have the court believe” something;
• A statement that “opposing counsel misstates” the facts or the law; and
• Anything that amounts to a personal attack on the trial judge or opposing counsel.

He advised us that a lawyer who accuses another of misrepresenting the law or the record—even euphemistically—will likely be called upon to justify his or her statement.[17]

Several judges made it clear that such an indiscretion will never directly hurt a client’s cause—the courts are “unlikely to hold one way or another because they find a lawyer’s conduct to be unprofessional.”[18] But unseemly conduct may divert the court’s attention from the key issues in the case. Accusing opposing counsel of misrepresenting an appellate record, for example, may prompt the court to explore the issue at oral argument. That, in turn, will require the accusing lawyer to spend precious minutes of argument off-point, explaining to the court whether a given record citation fully supports, only arguably supports, or does not support his opponent’s position. The result cannot be beneficial to the client.[19]

Just because a judge won’t penalize your client because of your behavior, however, is not a license to misbehave. Each judge and justice with whom we spoke reiterated the importance of a lawyer’s reputation. A notoriously difficult lawyer who finds him- or herself in a bind is likely to find that opposing counsel are less cooperative than they might be.[20] He or she might even find that the court is less receptive to requests for discretionary relief, such as continuances. Although Judge Weckstein conceded that “every lawyer is entitled to one bad day,” he also told us that “[i]f you are a pettifogger, your name will come up in judicial conversations. And where a judge might otherwise think you’re having a bad day, he or she will know that you’ve had bad days before.”[21]

3. Some Suggestions on How to Respond to Uncivil Language

How, then, should a lawyer respond to less-than-civil behavior? The jurists with whom we spoke offered a variety of solutions. Justice Lemons suggested engaging the issue head-on—for example, by noting that the opposing brief is replete with emotionally charged language and hyperbole, ceding victory in the name-calling contest, and getting back to the merits.[22]

By contrast, Magistrate Judge Urbanski suggested that a lawyer faced with venomous language in a pleading should not even acknowledge it. He or she would be better served by simply addressing the merits of the case. Judge Urbanski noted that, “[a] judge’s job is to do justice, not be a kindergarten monitor. . . .It’s not my job to play referee.” [23] He believes that an attorney should look past incivility unless it causes injustice—and at that point, the proper recourse is a motion for sanctions, not a reply in kind.

Justice Koontz tends to agree with this approach. When faced with a brief full of name calling, he suggested that the safest course of action is to “[i]gnore it. You never want to sink to that level of conduct, and you can ignore ad hominem attack with a certain degree of safety, because it won’t be ignored by the court.”[24]

[1] See, e.g., In re: Abbott, 925 A.2d 482 (Del. 2007). Mr. Abbott was sanctioned for statements he made in two briefs to the effect that opposing counsel presented a “fictionalized” account of a hearing, offered an “imaginary, make-believe set of reasons” to support their position, “fabricated” conclusions, made “ridiculous” arguments, and engaged in “pure sophistry” to “magically transmute” the law and create decisions “from whole cloth.”

[2] 272 Va. 211, 636 S.E.2d 889 (2006).

[3] Id. at 215-16, 636 S.E.2d at 891.

[4] Williams & Connolly, LLP v. PETA, 273 Va. 498, 519, 643 S.E.2d 136, 146-47 (2007).

[5] Id. at 519, 643 S.E.2d at 146, quoting Taboada, 272 Va. at 215-16, 636 S.E.2d at 891.

[6] Interview with Hon. Lawrence L. Koontz, Jr., Justice, Sup. Ct. of Va., in Roanoke, Va. (Nov. 19, 2008).

[7] Id.

[8] Interview with Hon. Clifford R. Weckstein, Judge, 23d Judicial Cir. of Va., & Hon. Martin F. Clark, Jr., Judge, 21st Judicial Cir. of Va., in Roanoke, Va. (Nov. 11, 2008).

[9] Interview with Hon. Michael F. Urbanski, Magistrate Judge, U.S. Dist. Ct. for the W.D. of Va., in Roanoke, Va. (Nov. 17, 2008); see also Interview with Hon. Clifford R. Weckstein, Judge, 23d Judicial Cir. of Va., & Hon. Martin F. Clark, Jr., Judge, 21st Judicial Cir. of Va., in Roanoke, Va. (Nov. 11, 2008) (opining that name-calling is unprofessional and “gets in the way” of efficient case resolution).

[10] Interview with Hon. Clifford R. Weckstein, Judge, 23d Judicial Cir. of Va., & Hon. Martin F. Clark, Jr., Judge, 21st Judicial Cir. of Va., in Roanoke, Va. (Nov. 11, 2008).

[11] For a full and thoughtful discussion of the point that anything that doesn’t help, hurts, from which this section borrows, see generally Antonin Scalia & Bryan A. Garner, Making Your Case: The Art of Persuading Judges (2008).

[12] Interview with Hon. Clifford R. Weckstein, Judge, 23d Judicial Cir. of Va., & Hon. Martin F. Clark, Jr., Judge, 21st Judicial Cir. of Va., in Roanoke, Va. (Nov. 11, 2008).

[13] Interview with Hon. Lawrence L. Koontz, Jr., Justice, Sup. Ct. of Va., in Roanoke, Va. (Nov. 19, 2008); Interview with Hon. Clifford R. Weckstein, Judge, 23d Judicial Cir. of Va., & Hon. Martin F. Clark, Jr., Judge, 21st Judicial Cir. of Va., in Roanoke, Va. (Nov. 11, 2008).

[14] Interview with Hon. Lawrence L. Koontz, Jr., Justice, Sup. Ct. of Va., in Roanoke, Va. (Nov. 19, 2008).

[15] Interview with Hon. Clifford R. Weckstein, Judge, 23d Judicial Cir. of Va., & Hon. Martin F. Clark, Jr., Judge, 21st Judicial Cir. of Va., in Roanoke, Va. (Nov. 11, 2008).

[16] Interview with Hon. Lawrence L. Koontz, Jr., Justice, Sup. Ct. of Va., in Roanoke, Va. (Nov. 19, 2008); Telephone Interview with Hon. Donald W. Lemons, Justice, Sup. Ct. of Va. (Nov. 6, 2008); Interview with Hon. Clifford R. Weckstein, Judge, 23d Judicial Cir. of Va., & Hon. Martin F. Clark, Jr., Judge, 21st Judicial Cir. of Va., in Roanoke, Va. (Nov. 11, 2008).

[17] Telephone Interview with Hon. Donald W. Lemons, Justice, Sup. Ct. of Va. (Nov. 6, 2008).

[18] Id.

[19] Id.

[20] Interview with Hon. Michael F. Urbanski, Magistrate Judge, U.S. Dist. Ct. for the W.D. of Va., in Roanoke, Va. (Nov. 17, 2008).

[21] Interview with Hon. Clifford R. Weckstein, Judge, 23d Judicial Cir. of Va., & Hon. Martin F. Clark, Jr., Judge, 21st Judicial Cir. of Va., in Roanoke, Va. (Nov. 11, 2008).

[22] Telephone Interview with Hon. Donald W. Lemons, Justice, Sup. Ct. of Va. (Nov. 6, 2008). For some excellent examples of this technique, see Bryan A. Garner, The Winning Brief 341-43 (2d. ed. 2003).

[23] Interview with Hon. Michael F. Urbanski, Magistrate Judge, U.S. Dist. Ct. for the W.D. of Va., in Roanoke, Va. (Nov. 17, 2008).

[24] Interview with Hon. Lawrence L. Koontz, Jr., Justice, Sup. Ct. of Va., in Roanoke, Va. (Nov. 19, 2008).

The New Genetic Antidiscrimination Law: Have you met GINA?

Tuesday, June 24th, 2008

On May 21, 2008, President Bush signed the Genetic Information Nondiscrimination Act (“GINA”) into law. The law prohibits discrimination by employers and insurers based on genetic information. This article touches upon some of the key provisions of GINA.

GINA expands Title VII by prohibiting employers from discriminating against employees or applicants on the basis of genetic information. “Genetic information” is defined broadly to include information about that individual’s genetic tests, the genetic tests of the individual’s family members, and the manifestation of a disease or disorder in the individual’s family members. The term “family member” is also broadly defined to include any fourth degree relative of the individual or the dependent.

Generally stated, employers cannot discriminate against an employee based upon genetic information, employers cannot retaliate against an employee who opposes genetic discrimination, and employers may not acquire genetic information about an employee or an employee’s family member. There are several exceptions. For example, employers may still seek appropriate information to comply with a request for leave under the FMLA.

GINA also contains an exception as to genetic services offered as part of a wellness program. There are strict requirements, however, associated with this exception.

Consistent with the Title VII protocol, an aggrieved individual must follow the EEOC’s administrative process. The EEOC is required to implement new regulations by May 21, 2009. These employment prohibitions take effect November 21, 2009.

GINA contains confidentiality provisions. In essence, any genetic information received must be treated as confidential and maintained in separate medical files. There are additional protections if an employer receives a subpoena for an employee’s file that includes genetic information.

GINA amends ERISA to bar group health plans and health insurance issuers from modifying contribution amounts or premiums based on the genetic information of any plan participant. GINA also amends HIPAA to include genetic information in the definition of protected health information. These provisions take effect in May 2009.

Over 30 states currently ban genetic discrimination in the workplace. Virginia is not on this list. For those of you with operations in other states, be aware that GINA does not preempt state laws that are more expansive.

It remains to be seen what impact GINA will have on the litigation landscape. For now, however, employers need to learn more about GINA, and need to review their policies and practices as they relate to the potential acquisition of genetic information.

Your Company Needs to Know About “No Match” Letters

Wednesday, February 13th, 2008

This article appeared in the Blue Ridge Business Journal on November 5, 2007. A formatted PDF is available under the Additional Reading section.

Since 1994, the Social Security Administration (“SSA”) has been sending “no match” letters to employers when an employee’s name or Social Security Number does not match SSA records. The purpose of these letters is to ensure that employees receive proper credit for earnings. Mismatched records are a growing problem for the SSA. The agency currently has more than 255 million mismatched records, and this number increases at a rate of 8 to 11 million per year.

There are many possible reasons for mismatches. Some are failures to report changes in information, such as name changes after marriage. Some are recording or typographical errors. Others result from employees who intentionally provide false information to their employers.

One reason an employee may provide false information to an employer is the employee is an illegal immigrant. For this reason, the Department of Homeland Security (“DHS”) has seized upon the SSA’s record of mismatches as a way to ensure compliance with immigration laws.

DHS is currently trying to implement changes to existing federal regulations that would require an employer to verify immigrant status upon receipt of a “no match” letter. Under the regulations, the employer must first verify that the mismatch is not attributable to a mistake in the employer’s records. The employer must then advise the employee to resolve the issue with the SSA. If the issue is not resolved within 90 days after receipt of the “no match” letter, the employer must complete a new Form I-9 for the employee, and cannot accept any documentation that includes disputed information. An employer that does not follow these guidelines and retains an employee who is not authorized to work could face civil and criminal penalties.

These changes have been met with stiff opposition from groups representing employers and employees. Businesses argue that the regulations impose significant burdens on smaller companies, and compel companies to act as immigration police. Employee groups fear that many authorized workers will lose their jobs because of the difficulty in clearing up discrepancies, and that the regulations will lead to illegal discrimination.

DHS’s efforts were recently dealt a serious blow. The AFLCIO and other labor groups filed a lawsuit, in which business groups later joined, challenging these regulations. The federal judge in that case recently granted a preliminary injunction temporarily prohibiting DHS from enforcing the regulations.

DHS is expected to appeal. Companies must be prepared to comply with the new regulations if the injunction is overturned. For now, however, employers should not take action against an employee solely based on receipt of a “no match” letter. Any such action may be construed as illegal discrimination. If your company receives a “no match” letter and has questions about its obligations, please contact us.

Tax Programs to Rehabilitate Real Estate

Wednesday, February 13th, 2008

This article appeared in the Blue Ridge Business Journal on November 5, 2007. A formatted PDF is available under the Additional Reading section.

In recent years, we have begun to realize the importance of saving older buildings in our region which can be historically significant bridges to our community’s past. Not only do these buildings add character and diversity to our surroundings, they provide significant tangible and intangible benefits to building owners, developers and our community.

Recognizing the positive impact revitalization can have on communities, the federal government and Virginia have implemented programs to encourage rehabilitation and preservation of historic structures which can be modernized and returned to service as economically and historically useful structures. The federal and state Rehabilitation Tax Credit programs, also known as the Historic Tax Credit or HTC, are both administered through the Virginia Department of Historic Resources (DHR) and both may be used in the same building rehabilitation project.

The investment generated by these projects represents costs paid to architects, contractors, suppliers and others in the construction industry with corresponding job creation. The capital improvements to the structures lead to increased commercial activity (increased commercial space), tourism, and enhanced revenues for localities, among many other benefits intrinsic to the preservation of historically significant structures.

How does the HTC work?
The HTC subsidizes rehabilitation of qualified buildings by providing owners with a tax credit (a dollar for dollar reduction in tax liability) equal to 20 percent (federal HTC) and 25 percent (state HTC) of the qualified rehabilitation expenditures for a certified historic structure (any building either listed on the National Register of Historic Places, or located in a registered historic district and certified as being of historic significance to the district). In some cases, a lesser amount of the HTC may be available for non-certified historic structures placed into service before 1936.

If rehabilitation of a building will cost $5 million in construction and qualified rehabilitation expenditures, it will generate $1 million (federal HTC) and $1.25 million (state HTC). These tax credits generated can be allotted to investors who will pay market rates (historically between 90 to 95 cents on the dollar (federal HTC) and 75 cents on the dollar (state HTC). The project will benefit from $900,000-$950,000 (federal HTC) and $937,500 (state HTC) in equity which translates into a much lower debt burden than if only traditional financing were used.

The mechanics of the HTC process can be intimidating, but, in a standard HTC transaction, the building is transferred to a limited partnership in which the project sponsor, or an affiliate, is general partner, and the investors are limited partners. This entity structure permits the project to receive its equity from the investors in the form of capital contributions while allowing tax credits to flow out of the partnership to the investors after the project has been completed. This ownership structure must remain in place for five years, at which time the partnership is unwound with the building transferred back to the project sponsor.

We are proud to have been involved in the structuring of the HTC aspects of the Jefferson Center Performance Hall, the Roanoke Higher Education Center, the Dumas Hotel, Warehouse Row, the Grandin Theatre, the Lynchburg Courthouse Museum and the Carter Glass Building (in Lynchburg), among a number of other HTC projects in Virginia and North Carolina.

Before undertaking a building rehabilitation, we recommend you meet with qualified professionals to explore options in using the HTC programs, along with other tax credit and grant opportunities which will bring your building back to life and preserve a historic jewel in our region’s crown.

Deferred Compensation Compliance Update

Wednesday, February 13th, 2008

This article appeared in the Blue Ridge Business Journal on October 8, 2007. A formatted PDF is available under the Additional Reading section.

In 2005, Congress dramatically changed the landscape of deferred compensation arrangements. In the wake of this new legislation, the IRS and Treasury Department issued volumes of regulations mandating how such arrangements must be structured. These regulations were scheduled to go into effect on January 1, 2007. However, on September 10, 2007, good news was announced – we now have one more full year to get deferred compensation documents into compliance. This does not mean that we are off the hook completely. The January 1, 2008 deadline for operational compliance is quickly approaching.

Q: What should be my company’s first step?

A: Your company may have more plans than you think. The first step is to identify all payment arrangements that might be impacted. The legislation is VERY broad and encompasses all arrangements that provide for deferred compensation with only a few exceptions. “Deferred compensation” is any compensation which is earned in one year and is or may be payable in a following year.

Common examples of affected arrangements include salary and bonus deferrals, supplemental executive retirement plans (SERPs), stock appreciation rights and phantom stock, discounted stock options, certain severance agreements, restricted stock units, and mirror plans.

Q: My company has deferred compensation plans. What should be done to comply?

A: The overarching theme of the new regulations is to limit the ability of an individual or company to manipulate the inclusion of income or the method of payment in order to reduce income taxes. To incorporate this theme, there are four general issues over the course of a deferral the IRS has targeted: (1) the initial deferral election, (2) the timing of payments, (3) acceleration of payments, and (4) subsequent deferral elections.

There are rules for each of these issues that reduce the employee’s or company’s ability to alter or change the form of payment and timing of the deferral. For instance, at the time of the initial deferral election, the form and time of payment must be specified. Later, if the employee decides to make a subsequent deferral to delay payment beyond the date as provided in the initial election, payment cannot be made until at least five years beyond the initially scheduled payment date in most cases.

Q: What are the consequences of noncompliance?

A: Compliance is critical. Failure to comply, in any respect, may render deferred compensation immediately taxable and cause an additional 20% penalty to be assessed. To further compound the tax costs, the IRS will impose late payment interest on the taxes owed. This late payment interest may begin to accrue from the date of the original deferral.

While these rather harsh tax sanctions fall on the employee, their impact may be felt by the employer, either through a formal indemnification agreement if the employer fails to amend the plan document to comply with the new rules or through employee

Advance Medical Directives: How Best to Deal with End-of-Life Decisions

Monday, February 11th, 2008

This article appeared in the Blue Ridge Business Journal on February 11, 2008. A formatted PDF is available by under the Additional Reading section.

Q: Who makes health care decisions for me should I become incapacitated?

A: In the absence of an advance medical directive made by a patient, a physician may provide or withhold treatment upon the authorization of a court-appointed guardian or committee. If there is no such court-appointed guardian or committee, then family members in descending order of relationship to the patient may authorize treatment. The order of relationship is as follows: spouse, adult child, parent, then brother or sister.

Q: How will my family members make health care decisions for me?

A: Family members are duty bound to make a good faith effort to understand the risks and benefits of alternatives to treatment. They must also base treatment decisions on your religious beliefs and basic values, as well as any preferences previously expressed by you.

Q: What is the best way to make my preferences known to my family?

A: The best way to make your treatment decision preferences known is to execute a written advance medical directive. An advance medical directive combines a living will with a medical power of attorney. In the living will portion of the advance medical directive, you give directions about whether you would want life-prolonging procedures such as a feeding tube to be provided or withheld should you have a terminal condition. In the medical power of attorney portion, you name an agent to make treatment decisions for you if you are unable to make them yourself.

Q: How is it determined that I am unable to make health care decisions for myself?

A: Your inability to make a health care decision for yourself must be certified in writing by your attending physician, as well as a second physician or clinical psychologist, and result from a disorder that either prevents you from communicating or impairs your judgment.

Q: Can my physician refuse to comply with the terms of my advance medical directive?

A: A physician is never required to render treatment that he or she determines to be medically or ethically inappropriate. If a physician disagrees with the terms of your advance directive, he must inform your agent and make a reasonable effort to transfer your care to another physician who is willing to comply with the terms of an advance directive.

Q: Who should I select to be my agent under the advance medical directive?

A: It is best to pick a responsible person who is willing to speak out, discuss sensitive issues, and handle conflict among family members. The person should understand your values and be able to separate his or her feelings regarding end-of-life decisions from yours.

Avoid Trouble: Steer Clear of Unlicensed Contractors

Monday, January 28th, 2008

This article appeared in the Blue Ridge Business Journal on January 28, 2008. A formatted PDF is available under the Additional Reading section.

Q: Are all construction contractors doing business in Virginia required to be licensed?

A: Whether you are a construction contractor or the owner of a construction project, this is a question of frequent interest. Knowing the answer will help any party involved in a construction contract to avoid the pitfalls of unlicensed contractors.

Virginia law requires that all persons or entities providing contracting services valued more than $1,000 be licensed with the Department of Professional and Occupational Regulation (DPOR). The DPOR’s Board for Contractors administers the licensure of Virginia contractors.

Virginia law provides that “no person shall engage in, or offer to engage in, contracting work in the Commonwealth unless he has been licensed…” Virginia law does not differentiate between contractors and subcontractors in this respect. Any contractor providing services, regardless of the level at which the contractor provides its services (general contractor, subcontractor, sub-subcontractor, etc.) must possess a license of sufficient level corresponding to the dollar value of its contract.

In Virginia, there are three levels of contractor licenses: A, B and C. The difference between these license levels primarily differentiates between the total value of the work the contractor will undertake. Virginia law defines Class A contractors as those who “perform or manage construction, removal, repair or improvements when (i) the total value referred to in a single contract or project is $120,000.00 or more, or (ii) the total value of all such…[work]…undertaken by such person within any 12 month period is $750,000.00 or more.” Class B contractors are restricted to projects of less than $120,000.00 in value and a total value of work of less than $750,000.00 in any 12 month period. Class C contractors are restricted to individual projects of less than $7,500.00 in value and a total vale of work of less than $150,000.00 in any 12 month period. For example, a Class C contractor cannot legally enter into a contract to add a bathroom to a residential home with an expected contract value of $15,000.00.

Regardless of whether the contract sets a fixed price or an hourly rate for the services to be provided, the contractor must be licensed to do the work. The failure to have a license can also be a bar to a contractor recovering payment for the work.

For more information on licensed contractors, or to verify that a contractor is licensed, visit the DPOR web site link below.

Annual Survey of Virginia Law: Labor & Employment Law

Monday, December 10th, 2007

The full article is available in pre-formatted PDF format under the Additional Reading section.

Published in the Richmond Law Review, November, 2007.

Introduction

This article looks back on important Virginia labor and employment law developments during the past year, including significant case law and legislation. Contract issues continued to dominate state-law employment litigation in Virginia, especially disputes regarding the enforceability of restrictive covenants. Section II of this article is devoted to some of the more significant employment contract cases considered by Virginia state and federal courts this past year. Section III discusses recent Virginia cases in which courts have considered Virginia’s narrow exception to the at-will employment doctrine for wrongful discharges that violate a public policy of the Commonwealth of Virginia. Defamation claims by former employees against their former employers are in vogue, and Section IV concerns two such recent cases considered by the Supreme Court of Virginia. Section V discusses a unique Supreme Court of Virginia case in which an employee pursued an abuse of process claim against her employer. Finally, Section VI provides an overview of significant employment-related legislative activity during the 2007 Session of the Virginia General Assembly.