All entries for April 2016

Worker's Compensation Statutory Provision on Fees Ruled Unconstitutional

A recent ruling by the First District Court of Appeals in Florida provides a bit of a novelty in jurisprudence; where a statute is declared unconstitutional.  Asked to determine if Sections 440.105 and 440.34 of the Workers' Compensation statutes is unconstitutional based on their individual impact on a person's ability to secure counsel in a workers' compensation case, the court stated:

Thus, we conclude that, to the extent these statutes prohibit a workers' compensation claimant (or a claimant's union) from paying attorney's fees out of their own funds for purposes of litigating a workers' compensation claim, these statutes are unconstitutional, because they impermissibly infringe on a claimant's rights to free speech and to seek redress of grievances.

Miles v. City of Edgewater Police Dep't/Preferred Governmental Claims Solutions, 190 So. 3d 171, 176 (Fla. 1st DCA 2016).  The issue here was that the claimant could not find attorneys willing to take on her rather complex case at the statutorily limited amounts under the workers' compensation statute (which limit an attorney to essentially 10% of the amounts recovered over $5,000).  

The First District determined that these two statues unconstitutionally impinged on the claimant's ability to secure counsel and should be invalidated.  It will be interesting to see if the legislature addresses this issue or if the case is taken to the Florida Supreme Court for further determinations. 


Good News on the Tax Front for Short Sales, Education, and IRA's

I recently watched the movie “Margin Call” starring Kevin Spacey and Jeremy Irons among others.  The movie takes place over a 24-hour period on Wall Street in 2008 and focuses on the beginning of the financial crisis caused by mortgage back securities. The storyline follows what happens after a junior member of a fictitious brokerage firm in the risk analysis department realizes that the mortgage-backed securities they have been selling for the last two years are now only worth pennies on the dollar and, if called in, the firm would be shut down. The movie then follows the next 24 hours and takes you through the decision making process that took place and how the firm acted in an attempt to limit its losses and survive the crisis.

Over the last eight years as a bankruptcy and foreclosure defense attorney, I have seen the aftermath of Wall Street’s greed on hard-working Americans who simply were pursuing what they believed to be the American Dream of homeownership. However, the movie depicts callous Wall Street brokers who viewed the circumstances that they created as simply a means of making money as if it were a game. While nothing can be done to rewrite history and rapidly increase the values of property, Congress in the past has approved legislation that would relieve some of the burden of conducting a short sale.

Whenever debt is forgiven, generally it is treated as income. For example if you settle a credit card dispute and the credit card company forgives $2,000 of the debt that you owed to it, you will receive a 1099 for that debt forgiveness which is reported as income. Therefore, you are taxed at your taxable rate for that $2,000. The same is true for mortgages.  I have had clients with properties that are over $300,000 upside down in that what they owe (i.e. exceeds the value of the property by $300,000.)  In such a case even if that $300,000 is forgiven by the lender and the lender agrees not to pursue the borrower for that deficiency, it is treated as $300,000 of income for which a borrower would have to pay tax on as income.

A few years ago, Congress decided to create an exception to the debt forgiveness as being treated as taxable income for someone who’s selling their primary residence and was residing in the residence at the time of the sale. In that case, that debt that was forgiven was not taxable. However, the law creating this exception expired in 2013. Congress waited until the end of December 2014 to extend it through the 2014 calendar year for any short sales that closed in the year 2014. However, again, it had not extended the law for 2015. Fortunately, Congress not only recently extended it for 2015 but also for 2016 as well. Therefore, if you are upside down on a house that is your primary residence and are attempting a short sale, if you close before December 31, 2016, you can avoid any taxable consequences for any debt forgiven by your lender.

However, keep in mind that this is only applicable to your primary residence. If it is commercial property or vacant land, you are not able to claim this exception and should consult your accountant for other possible ways to avoid the full taxable impact, such as, if you are partially insolvent.

The other way to avoid any taxable consequences for debt forgiveness, whether it is through the forgiveness of a credit card debt or a mortgage loan, is by filing for bankruptcy. Pursuant to the Bankruptcy Code, any debt forgiven by way of a bankruptcy Discharge is non-taxable. This is another benefit of the Bankruptcy Code. However, it is very important to realize that once a tax accrues, you may not be able to discharge that tax in a bankruptcy filing.  What this means is that if you short sale a property that s not your primary residence where there is debt forgiven, the taxable event has occurred and it may not be dischargeable in bankruptcy. Therefore, the timing of a short sale of a nonresidential property is crucial if you are also considering bankruptcy.

Another benefit for some homeowners which was extended by Congress relates to mortgage insurance premiums. Specifically, Congress extended the deduction for premiums paid for qualified mortgage insurance through 2016.

On the education front, if you are a teacher, the $250 above the line deduction that was provided in 2014 has been extended permanently and you may claim it for 2015.  Then, starting in 2016, the deduction will be adjusted for inflation. Also, if you are paying college tuition, the above the line deduction of up to $4,000 was extended for 2015 and through 2016. As the cost of college continues to rise, while this is a very small percentage, it is a help.

Finally, in the area of estate planning, there is a great benefit for charities and those wishing to donate funds from their IRA to a qualified charity. More specifically, if you are age 70½  or older, you can donate up to $100,000 a year to a qualified charity from your IRA and those funds are not included as part of your gross income. This provision has been made permanent. Before making such a contribution, you should consult with your investment advisor and accountant.

I am not sure if the reason that Congress extended some of these benefits is because it is an election year but, nevertheless, they will provide a substantial benefit to those facing a short sale, education expenses as well as those wishing to donate to charities from their IRA retirement funds. However, as with any serious financial transaction, I urge you to consult with the appropriate professionals such as your accountant and financial advisors before taking any actions to make sure you are in compliance with all the requirements necessary to qualify for these tax benefits.


Grievous Errors Continue in Foreclosure "Cattle Calls"

Anyone that has been to a foreclosure hearing or trial docket in the last five years or more will understand the obvious implications of those colloquially-termed "cattle call" dockets.  A room filled with attorneys, pro se homeowners, bored (or sometimes absent) bank representatives and court staff pack most courtrooms assigned to the foreclosure cases.  These conditions (and especially the dozens of cases set for the same hearing or trial time) lead to what some would consider an unusual amount of both mistakes and creative interpretations of the law and rules of evidence. A recent case outlines one (hopefully) extreme example of this situation.

In a Fourth District case, the homeowners were forced to appeal in order to overturn a judgment rendered almost entirely upon the testimony of a loan analyst that not only did not work for the then-current lender (and, seemingly never had worked for them), but also never worked for the predecessor lender and learned the information she testified to at trial by searching through Google on the internet. Sosa v. Bank of N.Y. Mellon, 187 So. 3d 943, 944 (Fla. 4th DCA 2016)  It bears repeating that the witness's testimony somehow avoided being stricken despite having virtually zero foundation whatsoever other than the witness essentially having heard of the lenders and looked them up on the web.  Thankfully, the appellate court prevented an egregious miscarriage of justice in this case, but the fact that a judgment was entered on these facts is frightening.  

This case drives home the point that it can be absolutely crucial to have competent counsel (as well as a court reporter) in a foreclosure trial or hearing.  Failure to have one could result in a homeowner having to either scramble after a zany ruling, or simply being ruled against in a way that clearly violates the law and rules of evidence.  Talk to the foreclosure attorneys at Icard Merrill today if you have questions about your home. 


Thinking of Hiring a Minor for the Summer?

Before you decide to hire the son or daughter of a family friend or co-worker for the summer, keep in mind Florida has certain rules and regulations for hiring minors between the ages of 14 and 17.  Certain restrictions are also imposed under the federal Fair Labor Standards Act (“FLSA”).  Summarized below are important criteria Florida employers should be aware of.

Posting Requirements

“Work permits” are not required in Florida.  However, there are certain posting requirements.  Specifically, all Florida employers who hire minors must display a poster in a conspicuous place on the property or place of employment notifying them of the Child Labor Laws.  The poster can be obtained through the Florida Department of Business Professional Regulation’s website (http://www.myfloridalicense.com/dbpr/reg/childlabor/documents/childlaborposter0709.pdf) or by calling Child Labor Compliance at 1.800.226.2536.

Documentation Requirements

A business hiring a minor is also required to keep proof of age documentation (i.e., copy of driver’s license, birth certificate, etc.) which must be maintained throughout the duration of the minor’s employment.  Unless your company is exempt from the FLSA, the records must be kept until the minor turns 19.

Summer Hour Limitations

Both Florida law and the FLSA regulate the number of hours a minor may work.  Employers must adhere to the stricter provisions when the laws differ.   These limitations, however, are loosened when school is not in session. For example, during the summer from June 1st through Labor Day, 14 and 15 year-old minors may work up to 8 hours each day and 40 hours per week between the hours of 7 a.m. and 9 p.m.  Teenagers who are 16 and 17 may work unlimited hours during summer vacation and non-school weeks.

Breaks/Days

Under Florida law, no minor may work more than four (4) hours without a 30-minute, uninterrupted meal break.  This applies throughout the year, regardless of whether school is in or out of session.  Similarly, minors are not permitted to work more than six (6) consecutive days in any one week throughout the year.

 Safety/Hazardous Occupations

In an effort to ensure a safe working environment for minors, Florida has incorporated certain “hazardous occupations” of the FLSA into the Florida law and Child Labor Rule. As such, employers are prohibited from employing minors in certain occupations, and minors are not allowed to perform certain tasks.  These include, but are not limited to:

  • Working on scaffolding, roofs or ladders above six feet
  • Operating power-driven meat processing machines to include meat and vegetable slicers
  • Operating power-driven bakery, metal-forming, woodworking, paper product or hoisting machines
  • Operating motor vehicles as drivers or delivery drivers, and serving as outside helpers
  • Operating circular saws, band saws and guillotine shears
  • Manufacturing brick and tile products
  • Working with electrical apparatus and wiring
  • Working in occupations involving toxic substances or corrosives, including pesticides or herbicides, unless proper field entry time allowances have been followed

There are additional restrictions for 14 and 15 year-olds including, but not limited to:

  • Operating or assisting to operate power-driven machinery, including all power mowers and cutters
  • Maintaining or repairing machinery or equipment
  • Working in freezers or meat coolers 
  • Operating, setting up, adjusting, or cleaning power-driven meat or vegetable slicers, grinders, food choppers, and cutters, and bakery-type mixers
  • Manufacturing, mining, or processing occupations, including occupations requiring duties to be performed in workrooms or workplaces where goods are manufactured, mined or processed
  • Cooking (some exceptions apply) and baking
  • Working in occupations in Transportation, Warehousing and Storage, Communications, and Construction (except clerical), boiler or engine rooms  
  • Loading and unloading trucks
  • Working in public messenger services
  • Spray-painting

Penalties

Failure to comply with the above restrictions could result in costly penalties. Florida Child Labor laws authorize fines up to $2,500 per offense. Not surprisingly, penalties under the FLSA are even harsher, with maximum fines up to $11,000 per minor/violation.  Florida law also carries potential criminal consequences, e.g., the risk of being found guilty of a second-degree misdemeanor.

Recommendations

Before your company offers a position to a teenager in the hopes of providing a productive and positive summer work experience, be sure to take appropriate steps to ensure compliance with the various requirements and limitations imposed under both Florida and federal law.  In particular, employers should:

  • Display a Child Labor Law poster in a conspicuous place
  • Maintain proof of age documentation of all employees under the age of 18
  • Prepare schedules appropriately and monitor hours worked to ensure they do not exceed those permitted by law, e.g., 14 and 15 year-olds may not work more than 8 hours/day, or before 7:00 a.m. or  after 9:00 p.m.; no minor may work more than 6 consecutive days in any one week.
  • Ensure a 30-minute, uninterrupted meal break is given before a minor works more than four (4) consecutive hours
  • Depending on the industry, evaluate whether minors are prohibited from working in your particular occupation or from performing certain tasks deemed to be unsafe to the health and safety of minors.  

Hopefully, the summer experience is a good one.  Should the company desire to retain the teen worker after Labor Day when school resumes, be sure to reevaluate scheduling.  Hours of work become more restrictive once school is back in session.

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If you have any questions or would like guidance with the hiring of minors or other Child Labor or employment law issues, please contact Jessica M. Farrelly, Esq. in the firm’s Employment Law Practice Group.