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Anthony B. Ferraro Presents Online Elder Law Webinar Series

Join Attorney Anthony B. Ferraro in the upcoming Elder Law webinars hosted by District 128 Community Education.

  1. Wills and Trusts Live Online
    1. Date: September 14, 2021
    2. Time: 6:00pm-7:00pm
    3. Description: Learn the similarities and differences between wills and trusts, different types of trusts, probate proceedings and guidance, taxation, and more.
  2. Elder Law Primer Live Online
    1. Date: October 12, 2021
    2. Time: 6:00pm-7:00pm
    3. Description: Discussing wills and trust planning, powers of attorneys for property and healthcare, guardianships, Medicaid rules and qualifications, public benefits, spousal impoverishment rules, and long-term care insurance.
  3. Boomers and Seniors: Don’t Go Broke in a Nursing Home Live Online
    1. Date: November 9, 2021
    2. Time: 6:00pm-7:00pm
    3. Description: Learn how to legally protect your assets from long-term nursing home costs, establish a “rainy day fund”, how to find hidden veteran benefits and more.
  4. Surprised You’re Named Executor and Trustee! Now what? Live Online
    1. Date: December 7, 2021
    2. Time: 6:00pm-7:00pm
    3. Description: Learn how to efficiently plan and administer your estate to avoid probate, how to handle simple and complex estates, manage IRA’s and 401(k)s, titling of assets, file tax returns, estate tax, and the difference between revocable and irrevocable trusts.

Note: An account is needed to sign-up for webinars through District 128 Community Education. Click here to create a new account.

District 128 Community Education charges $15.00 per webinar.

Registration closes at midnight the day of the webinar (ex: October 12, 2021 at 12:00am).

Dementia, Alzheimer’s, and Diminished Mental Capacity: How it Affects Your Patient, Resident, Client, or Loved One on the Long-Term Care Journey

By Anthony B. Ferraro

Navigating the Long-Term Care Journey#2 in a Series

In the previous installment we mentioned how important it is to begin senior estate planning or traditional estate planning with the execution of powers of attorney for both property and healthcare matters. Quite often we take for granted the notion that these documents will be something that are easy to have signed.

However, when a person has diminished mental capacity, sometimes it can be difficult or impossible to have such documents executed by a patient, resident, client or loved one because they no longer possess the required cognitive capability to sign the documents legally and ethically.

This is an impediment, even if we know that the documents would be good for them to have. If cognitive capacity does not exist, the documents cannot be signed, legally or ethically, even if the individual can go through the physical motion of signing their name. This is because even though they may be able to sign their name, they may not understand what it is they are signing.

Sometimes circumstances are very clear-cut as to whether mental capacity exists, but sometimes the facts surrounding behavior are not so clear or not so well understood.

What can be done then?

In situations where it is not clear as to whether a person has mental capacity, the attorney may need to seek consultation from a medical professional or mental health expert.

If a formal assessment is required, the attorney usually attempts to obtain the consent and cooperation of the client, if that is possible. Sometimes this can be upsetting or embarrassing to a client. Nevertheless, the determination of mental capacity is something that must be established before other matters encountered on the Long-Term Care Journey.

Assuming that either the consent of the client is obtained, or perhaps the client cannot consent, then who should a lawyer look to as a referral for consultation on matters of diminished mental capacity?

If the patient, resident, client or loved one is fortunate enough to have a physician regularly attending to them, then reaching out to that physician may be the first order of business. Sometimes however, primary care physicians may decline to opine on matters pertaining to mental capacity as they may feel that they are not trained sufficiently to administer psychiatric, neurological, and psychological assessment tests.

It should be noted that effective January 1, 2023, the State of Illinois passed a new law indicating that any person seeking licensure to practice medicine in all of its branches is to have completed three hours of education on the diagnosis, treatment, and care of individuals with cognitive impairments, including, but not limited to Alzheimer’s disease and other dementias.  Illinois Senate Bill 0677.

If the attending physician will not undertake the assessment, you may look to other geriatric assessment professionals that can often take a multidisciplinary approach to determining mental capacity.

Keep in mind that the determination of mental capacity is sometimes complicated by the fact that mental capacity can vary from day to day and can vary from task to task. This means that an individual can have the capacity for one type of task, for example, the execution of a power of attorney for healthcare, but may not have the sufficient capacity for the execution of a power of attorney for property that has gifting and asset repositioning authorizations written into the document.

Why the difference?

The reason is: the former task (executing a power of attorney for healthcare) has a lower cognitive capacity standard or threshold that must be met to establish capacity. The latter task (executing a power of attorney for property) has a higher cognitive capacity standard that must be met, which standard is, for example, closer to the standard that must be met to knowingly execute a contract.

These varying degrees of capacity are why it’s important to select professionals that are trained to parse the levels of capacity needed based on the specific tasks that are being contemplated. As you can see this can become complicated.

The Takeaway:

Obtain and sign powers of attorney for healthcare and powers of attorney for property, as well as any other applicable and appropriate estate planning documents that you need for either “senior” estate planning or traditional estate planning, as soon as possible. Waiting until a person one reaches the later stages in life, creates the risk that in those later stages, you may not have the requisite mental capacity to execute the documents that you need.

The problem that arises:

If you do not have the requisite mental capacity to execute documents legally and ethically, it may be necessary for counsel to engage in a protective action such as an expensive guardianship proceeding in the State of Illinois court system. For example, let’s assume the senior resides in the City of Chicago. At this time, in the Circuit Court of the County, the waiting period for a hearing on a guardianship petition can take as long as 4-6 weeks, or longer, due to tremendous case backlog in Cook County. This creates unnecessary expense and time delay that can be avoided with the timely execution of estate planning documents such as powers of attorney for property and powers of attorney for healthcare.

In our office, we recommend people execute powers of attorney when they are 18 years of age! Obviously, the type of powers of attorney that an 18-year-old may need will be quite different than that of an 88-year-old, but the point is you need to get these documents in place sooner rather than later.

Don’t fall into the trap of helplessness that diminished mental capacity can create and possibly be permanently locked out of your constitutional right to self-determination, regarding your own health needs, property matters, estate plan, and other related matters.

The Illinois Rules of Professional Conduct require attorneys to identify unsolicited communications to prospective clients as Advertising Material. If the context requires, please consider this letter and the enclosed literature to be Advertising Materials.

This document is for discussion purposes only and is not intended to be, nor should it be, considered as legal advice. You should never attempt Medicaid planning, Estate Planning, Probate or Trust Administration without the advice of competent legal COUNSEL.


To execute or update your estate plan or long-term care documents, contact Anthony B. Ferraro: Phone: (847) 698-9600. Email: aferraro@dimontelaw.com.

Revise Your Powers of Attorney Before Long-Term Care

By Anthony B. Ferraro

69-70% of people in the United States are expected to require assistance with some type of long-term care.

Do you have powers of attorney in place?

I know it sounds simplistic, and we have all heard this before, but perhaps the most important document that you can have before needing long-term care is the power of attorney.

Why is the power of attorney so important?

A power of attorney is a legal document where one person called the “principal” authorizes another person called the “agent” to act on their behalf regarding either financial or health related decisions.

Without these powers of attorney in place, no one may have the legal authority to act on another’s behalf and therefore a guardianship proceeding may become necessary. A guardianship proceeding is conducted in court and establishes a legal relationship where a person(s) is appointed by the court (usually a family member) as the guardian of the person that will have the power to make health decisions for another; usually called the Ward. The same person may also be appointed by the court as the guardian of the estate and can then make financial decisions and handle the financial assets of the Ward.

Guardianships can be expensive. They require the opinion of a physician and the appointment of a Guardian ad litem. A Guardian ad litem is a court-appointed attorney who acts as the eyes and ears of the judge. Guardianships also require many process formalities and judge’s orders. These matters are strictly observed to ensure that the Ward is protected. This is all well and good, and we are all fortunate to have a legal system that can help serve those that are disabled and may not have had the opportunity to put in place powers of attorney. However, you may avoid this entire process by having a valid power of attorney for property and finance matters and/or a valid power of attorney for healthcare matters. Not only would that process be avoided but all affairs pertaining to your person and your estate can be streamlined while you may be temporarily sick, disabled, or if you need long-term care.

How many different types of powers of attorney are there?

In Illinois we have two types of powers of attorney: one for health and one for property and financial matters.

Sometimes these documents are called statutory powers of attorney and at other times these documents are called durable powers of attorney. The difference lies in the type of form selected to draft the power of attorney and the content of the document. Most of the time we recommend you stick to the Illinois Statutory Short Form Powers of Attorney (one for health and a separate one for property) because these are the type of forms that doctors, other health providers, banks and financial institutions most readily recognize.

Can I create my own powers of attorney?

Yes, you can.

However, they may not contain the necessary language that Elder law attorneys put into such documents such as: the power to make specific types of gifts to family members. This is necessary for tax minimization or for seeking asset tested government benefits like Medicaid. Other important language may deal with the power to remove and add assets to trusts, the power to apply for public benefits and the power to appeal any decision on public benefits. Standard power of attorney forms generally do not have these provisions built into them. By not having this language in place, many are missing out on benefits and protection.

How old should you be when you start executing powers of attorney?

Upon becoming 18 years of age.

Most people do not realize that once a child has reached age 18, no one, including parents, can make either financial or medical decisions for their children without legal documents, such as powers of attorney, authorizing this decision-making power.

Thus, ask your children to get powers of attorney in place immediately upon turning 18 years of age.

Are their risks with Powers of Attorneys?

Yes.

However, many practitioners believe that having powers of attorney in place, with the appropriate safeguards, is less risky than not having powers of attorney at all.

So, what are the risks and the appropriate safeguards?

Since a power of attorney for property and financial matters authorizes your agent to be able to make disbursements of money on your behalf, this power, like any power, can be abused.

To prevent, or at least minimize the risk of a rogue agent from abusing their power, it may be useful to put restrictions in the powers of attorney for property and financial matters, including but not limited to, the following, as examples:

  1. the agent could be required under the terms of the power of attorney document to provide monthly statements from all asset custodians to an independent third-party, selected by the principal who has the right to request the delivery of these monthly statements and will do an independent reading and review to determine whether the expenditures by the agent are solely for and in the best interests of the principal
  2. the agent could be precluded under the terms of the power of attorney document from creating joint tenancy accounts between the principal, the agent himself or herself, and/or the principal and any third party.
  3. consider appointing or at least delegating to (on a contractual outsourced basis), reputable, corporate health professionals such as care managers who often will act as power of attorney for healthcare in some situations, and some will also act as agent under power of attorney for property and financial matters. Inquire as to whether they are bonded and insured.  This is good option where there may be NO friends or family who are trustworthy, sufficiently experienced, able or willing to act.

These are just examples of some of the precautions that can be taken so that a good power of attorney is put in place and steps are taken to make sure that any possible abuse by a rogue agent is minimized.

What’s the takeaway?

You could wait until later when you need them, however if you develop diminished capacity and lose the cognitive ability to execute documents legally and ethically, then you may never be able to have these types of documents in place and the only alternative may be for someone to pursue, on your behalf, an expensive and complicated guardianship proceeding in court.

Make sure your powers of attorney are in place now.


To execute or update your Powers of Attorney or other estate plan documents, contact Anthony B. Ferraro: Phone: (847) 698-9600. Email: aferraro@dimontelaw.com.

If the Dress Fits, You Must Acquit

By Julia Jensen Smolka

I love trial work. It’s why I became a lawyer. However, 90-95% of cases are settled before trial. It makes sense because trials are expensive and the outcomes are uncertain. I typically try to settle my cases before trial. But not every case settles. I recently tried a case that I will remember for a long time.

Our client was an upscale women’s boutique in Chicago. It sells high end clothing and accessories. It purchased several dresses and shirts from an up-and-coming young designer. The designs were beautiful and expensive. When they arrived at the store in time for spring, there was a problem. The dresses and shirts were sized improperly. Some ran large, some ran small. And they were not selling.

The store complained and tried to return the merchandise. They called, emailed, and sent photos to the designer without receiving satisfaction. They had a sales representative come to the store to see the problems. The representative agreed the merchandise was not cut properly, but the designer would not take back the merchandise, and demanded to be paid in full. The store refused to pay for the merchandise. The store struggled to sell it and slashed the prices. Finally, a dozen or so pieces sold from the clearance section for a fraction of what the store was charged for the merchandise. The designer eventually sued the store.

The designer was not interested in settling the dispute, he wanted to be paid in full. We eventually tried the case. The designer came to Chicago from New York. As plaintiff, he testified first, and told the judge what a great designer he was. He told her about his background, his stint on a reality TV design show, and about how popular he is. The designer’s attorneys called the shop owner as a witness to try to have her admit that she did not pay the invoice. She admitted it, but claimed the clothing was not cut properly. The shop owner brought the dresses and shirts with her to show the judge how the fit was incorrect. However, the judge stated she could not tell from merely holding up the dress, she said she needed a model to tell. After the designer presented his case, we took a lunch break.

Over lunch, I decided it was not enough to explain why the clothes did not fit. We had to show the judge. We didn’t have any models at the ready. So, we took matters into our own hands. My client, who was a size 4, put on a dress that was a size 6 and was tight in all of the wrong places. The dress retailed for $495.00. I then put on a dress that was a size 6 but fit my size 10 frame. That dress retailed for $595.00. I put my suit jacket on over it. We returned from lunch.

I had my client stand and testify to her true size by showing the label of her skirt to the court. She then showed the judge how tight the dress was on her and explained why it was sized incorrectly. The designer’s counsel became upset and shouted his objections to what we were doing. I reminded the judge of her own words before lunch that she needed a model to show the clothes. The judge smirked a bit and overruled the objection and allowed the demonstration. I then took off my suit jacket, had the client read the label which confirmed it was a size 10, then had the client read the size label in the dress, which was 6. The two dresses were each size 6, each mis-sized.

The designer returned to the stand for rebuttal and stated that his clothes were made in New York under strict quality control. I merely asked him to confirm that this dress fit me properly. He admitted that it did. We won the trial. The judge agreed that the designer, who sued for breach of contract, could not meet his burden by showing he performed his terms of the contract, which was to sell clothing that was made properly.

I will remember this case for a long time. It was fun to be a part of the trial evidence as well. And to answer the question you are probably thinking, no, I did not get to keep the dress.

Revisiting the COVID-19 Vaccine Requirement

By Karuna S Brunk

As businesses reopen and return to pre-pandemic conditions, employers have lingering questions related to COVID-19, including concerns about programs requiring or incentivizing the COVID-19 vaccine in the workplace.  On May 28, 2021, the EEOC released revised Technical Assistance Questions and Answers to address employer questions regarding COVID-19.

Here are the important takeaways:

  • Yes – employers can ask employees if they have received a COVID-19 vaccine. This type of request is not a “disability-related inquiry” under the Americans with Disabilities Act (“ADA”).  Employers can also ask for proof that an employee received the COVID-19 vaccine.  However, similar to other medical records and information – confirmation or evidence that employees received the COVID-19 vaccine is considered confidential medical information and should be stored in a secure location and not disclosed to others.  Follow up questions about why an employee did not receive the vaccine may be considered “disability-related inquiries.”covid, coronavirus, vaccine, requirement, return-to-work, remote, mask, covid test, proof, evidence, ada, eeoc, religious belief, undue hardship, incentivize, guidance, social distance, risk, duration, employee, employer, business, DiMonte, Lizak, Chicago, park ridge, CDC, workplace, prohibit, discrimination, law, lawyer, attorney, consultation
  • Yes – employers can require employees physically entering the workplace to be vaccinated for COVID-19. However, Title VII of the Civil Rights Act of 1964 (“Title VII”), which prohibits discrimination based on “sincerely held” religious beliefs, and the ADA, which prohibits discrimination based on disability, require that employers provide reasonable accommodations to individuals who do not get vaccinated due to their religious beliefs and practices or due to their disabilities.
  • What kind of accommodations should employers consider? The EEOC understands that employers should not have to accommodate unvaccinated individuals at the risk of undue hardship on the business. Suggested accommodations include requiring unvaccinated individuals to wear masks or creating a socially distanced work environment.  Employers may require them to work a modified shift, telework, or receive regular COVID-19 testing.
  • What is an “undue hardship”? The caveat to the accommodation rule is when an employer can demonstrate that providing such an accommodation would pose an undue hardship to the operation of the employer’s business. Employers must assess the risk posed to the workplace by unvaccinated individuals, including the duration of the risk, the nature and severity of the risk, the likelihood of potential harm, and the imminence of the harm.  Much of this evaluation will be based on the particular industry or factual situation.
  • What about incentivizing COVID-19 vaccines? Employers can educate employees or offer incentives to employees to get vaccinated.  For example, the EEOC recognizes that some employees may not be fully educated about the risks and benefits of COVID-19 vaccines.  As such, employers can distribute educational materials, such as information from the Centers for Disease Control and Prevention (“CDC”).  Other options include providing transportation to vaccination sites.
  • Employers can require that employees receive the COVID-19 vaccine from the employer or an agent of the employer or institute a voluntary vaccination program. If the employer requires that employees receive the vaccine from itself or its agent, ADA restrictions apply because, before administering the vaccine, the recipient generally answers questions regarding his medical suitability to receive the vaccine – this is a “medical examination” under the ADA.  Thus, such questions must be “job related and consistent with business necessity.”  The employer must have a reasonable belief that an employee who does not answer the questions and cannot be vaccinated would pose a direct threat to the employee’s own health or the safety or health of others in the workplace.  If an employer has a voluntary vaccination program, these ADA requirements do not apply.

This is simply the “tip of the iceberg” of COVID-19’s impact on the workplace and the EEOC’s guidance concerning vaccines.  We will continue to monitor changes in the law related to COVID-19.  Employers should reach out to an experienced employment attorney at DiMonte & Lizak, LLC with questions or concerns.

New Illinois Law Changes the Restrictive Covenant Landscape

By Jonathan R. Ksiazek

On May 31, 2021, the Illinois House and Senate both passed Illinois Senate Bill 0672, titled the Fair Food Delivery Act. While the Fair Food Delivery Act was passed with the goal of protecting small businesses from third-party delivery services using their likeness, trademarks or intellectual property without consent, it also contains provisions that would codify key aspects of Illinois law governing enforcement of restrictive covenant agreements. To that end, S.B. 0672 contains provisions that amend the Illinois Freedom to Work Act to restrict employer use and enforcement of these types of agreements. Governor Pritzker is expected to sign S.B. 0672 into law before August.

Restrictive covenant agreements are agreements that prohibit an individual from competing against their former employer for a certain timeframe. For example, a non-competition agreement restricts the ability of an individual to work for a related employer for a specific time and geographical area after their employment end while a non-solicitation agreement restricts an individual from marketing or hiring employees who currently work for the employer. The law in Illinois governing restrictive covenant agreements, including non-competition agreements and non-solicitation agreements, has principally been made through decisions in Illinois courts. Illinois courts typically enforce restrictive covenant agreements where an employer can show that the agreement was necessary to protect their legally protectable interests, based upon a factual analysis of the circumstances in each case under a reasonableness standard.

However, the law on restrictive covenants can be confusing and vary depending on the court. Prior to S.B. 0672, the Illinois legislature had not codified the relevant legal standards governing the enforceability of restrictive covenants. Under S.B. 0672, companies can continue to enforce non-compete and non-solicit agreements when there is a legitimate business interest a company needs to protect. However, use of these agreements is restricted in S.B. 0672 as follows:

  • Non-compete agreements are prohibited for all employees making less than $75,000 per year starting in 2022, $80,000 per year starting in 2027, $85,000 per year in 2031 and $90,000 in 2037.
  • Non-solicit agreements are prohibited for all employees who make less than $45,000 per year, with increases over time to $52,500 by 2037.
  • Non-compete agreements will not be enforceable against employees who lost their jobs due to COVID-19 or a similar pandemic unless the former employer continues to pay their base salary.
  • Independent consideration is required for a non-compete or a non-solicitation agreement to be enforceable, resolving a dispute between the state and federal courts in Illinois.
  • Courts can only enforce a non-compete or a non-solicit agreement if an employee has worked for an employer for at least 2 years or has received some other benefit for the restriction.
  • If an employee wins a lawsuit an employer filed seeking to enforce a restrictive covenant, the employee will be entitled to recover attorneys’ fees.
  • Employers will be required to provide employees with 14 days to consider and review any non-compete or non-solicit agreement.

Once signed into law, SB 0672 will become effective as of January 1, 2022. The legal requirements set forth in S.B. 0672 do not apply to restrictive covenant agreements that are entered into prior to January 1, 2022. Thus, employers who have entered into legally enforceable agreements with their employees under the current state of the common law would be able to rely upon and enforce these agreements under the pre-existing, and potentially less restrictive, standards.

DiMonte & Lizak will continue to monitor new employment law developments in Illinois as they arise.

Cook County Enacts New Residential Landlord-Tenant Ordinance

By Taylor H Wachal

On January 28, 2021, the Cook County Board commissioners approved a suburban residential landlord-tenant ordinance (the “Cook County Ordinance”). It will create regulations throughout the entire county, except for municipalities of Chicago, Mount Prospect, and Evanston, which already have their own regulations in place. In many ways, the Cook County Ordinance mirror’s Chicago’s ordinance. Suburban landlords will now have another level of due diligence to consider, prior to renting out their properties.

However, the following types of properties are exempt from the Cook County Ordinance:

  1. Owner-occupied buildings with six units or less; and
  2. Single-family homes, or single condominium units, that are not owned or managed by a company, where the owner or owner’s family member has resided in the property within the last twelve months.

The Cook County Ordinance took effect June 1, 2021. Below are some of the key points of the new ordinance.

Prohibited Lockouts

The provision of the Cook County Ordinance that prohibits landlords from locking out tenants without the proper eviction process (illegal eviction) went into effect immediately. This is the only immediately applicable regulation. If the landlord illegally locks out the tenant, the tenant may file suit to get back into the unit plus for his or her attorneys’ fees and damages (two months’ rent or twice the actual damages, whichever is greater).

Late Fees

Landlords are prevented from charging late fees greater than $10 per month for the first $1,000 in rent, plus 5 percent per month for any amount of rent over $1,000. For example, if a monthly rental amount of $1,500 is late, the highest fee a landlord may charge is $35.

Security Deposits

Security deposits may be no more than 1.5 times the monthly rent. Any amount in excess of the value of one month’s rent, at the election of the tenant, shall be paid either simultaneously with the initial security deposit, or in no more than six installments within six months after the effective date of the applicable lease. Security deposit payments cannot be disguised or utilized as anything other than a security deposit (i.e., move-in fee, pet fee, etc.).

Also, security deposits shall be held in an account of a financial institution located in the State of Illinois. Those funds remain an asset of the tenant and may not be commingled with assets of the landlord. The funds must be deposited into a separate account that complies with the Cook County Ordinance. The deposit must be returned to the tenant within thirty days of moving out. If the landlord retains any portion of the deposit, a detailed explanation of the costs to support that retention must be provided to the tenant within thirty days.

Move-In Fees

Move-in fees are permitted, but an itemization including a reasonable estimate of the landlord’s cost for moving the tenant into the unit, must be provided as support for the fee.

Lease Renewal/Non-Renewal

The landlord must notify the tenant in writing of his or her intent to not renew the existing rental agreement at least sixty days prior to the termination date of the applicable lease. If the landlord fails to give required written notice, the tenant may remain living in the property for up to 120 days after the date on which the notice should have been given. During that time, the terms and conditions of the lease stay the same. Further, no tenant may be required to renew a lease more than 60 days prior to the termination date of the applicable lease. If the landlord violates this regulation and requires further notice, the tenant may recover one month’s rent or actual damages, whichever is greater. Landlord’s Access to Property A landlord must give two days’ notice to the tenant if the landlord intends to access the property. The landlord may only enter the property between 8:00 a.m. and 8:00 p.m., unless emergency access was necessary. If the landlord unlawfully enters the property, the tenant may file suit and recover one month’s rent or twice the actual damages, whichever is greater, plus attorneys’ fees.

Attorneys’ Fees

There are various provisions of the Cook County Ordinance that provide for the recovery of attorneys’ fees by both the tenant and landlord. However, the Cook County Ordinance prohibits leases from including a provision that generally states that the tenant will pay for the landlord’s attorneys’ fees in an eviction lawsuit. Attorneys’ fees are only recoverable if provided by court rules or statute. Further, the Cook County Ordinance provides for statutory damages of two months’ rent or recovery of actual damages, if a lease contains a provision of this nature.

Landlord Repairs

Landlords will be given timelines to address defects of their properties and will be subject to lease terminations or loss in, should they miss the deadlines. For example, minor problems (i.e., repairs that don’t cost more than $500 or half a month’s rent, whichever is greater) must be fixed within fourteen days upon written notification from the tenant, or the renter can fix it themselves and deduct the cost from their rent. If the landlord fails to repair the defect within 14 days after notice, the tenant may deduct rent in an amount that reasonably reflects the reduction in rental value caused by said defect. The tenant may also file a lawsuit for an injunction plus any damages the defect has caused them.

The above points are what we deem to be the most pertinent changes to for Cook County landlords. For further guidance on all of the new regulations under the Cook County Ordinance, it is best to review the full text.

Single Purpose Entities in Commercial Real Estate Transactions

By Robert E. Harig

The concept of a single purpose entity is often present in the purchase and financing of commercial real estate.  A lender may require its borrower to be a single purpose entity in order to lessen the lender’s bankruptcy risk in the event that the borrower or any of its parent entities file for bankruptcy, and also to ensure that no other businesses of the borrower adversely affect the property that is the subject of the loan.  A single purpose entity is often advisable from the owner’s and investor’s perspectives as well, in order to isolate potential liabilities in a single entity and protect the subject real estate from downturns in other portfolio properties.

What, then, is a single purpose entity, how are they structured, and what advantages do they provide?

A single purpose entity, or SPE, is frequently a limited liability company or s-corporation that is formed for the single purpose of holding a specific parcel of commercial real estate. The SPE owns no other assets and is subject to no other liabilities, and the real estate it owns serves as collateral for the lender.  Often, the SPE contracts with an affiliated company which serves as the manager of the property and handles matters such as tenant leases and day-to-day business operations of the property.

The purpose of the SPE is expressly limited under its governing documents to owning only the specific parcel of commercial real estate.  By so limiting the purpose of the SPE, the number of creditors that might be involved in any bankruptcy proceeding affecting the SPE is also essentially limited to the lender that is financing the purchase of the subject real estate.

A single purpose entity is often required under its governing and loan documents to keep its assets separate from those of its parent and other entities, to maintain separate books and records from other related entities, and to not commingle its cash and other liquid accounts with those of other entities.

In addition, the SPE’s loan documents usually limit its third-party indebtedness to just the underlying purchase loan, plus unsecured trade payables and possibly equipment leases. Single purpose entities are also generally prohibited from guaranteeing obligations of other entities or pledging their assets as collateral for the debts of another person or entity.

Single purpose entities are sometimes required by their lenders to have a springing member in order to protect against dissolution. Upon the occurrence of any event that causes the last remaining member of the SPE to cease to be a member, the springing member “springs” into place as a new member, thus allowing the SPE to continue its existence without facing the prospect of dissolution due to having no members.

In order to further distance the single purpose entity from any possible bankruptcy, lenders might require a single purpose entity to have one of more independent managers or directors, and the approval of such an independent manager or director is necessary in order for the SPE to file a bankruptcy petition. A manager or director is considered independent only if that person does not have any direct or indirect ownership interest in or business dealings with the SPE. Certain national service companies are available to provide independent manager services for an annual fee.

Lenders may look for additional bankruptcy protection by requiring the SPE to deliver a satisfactory non-consolidation opinion of counsel at the time of the loan closing. The non-consolidation opinion is given by an independent outside law firm selected by the SPE and approved by the lender, and such firm examines and analyzes the structure of the subject single purpose entity for the purpose of its opinion. This opinion is addressed to the lender and is intended to conclude that, in the event that one or more equity owners of the SPE were to file a bankruptcy petition, the bankruptcy court would not consolidate the property that is owned by the SPE with the properties of its parent or other affiliated entities and, therefore, the property of the SPE would not be made available to pay the creditors of its affiliated entities.

While lenders often require the borrower to be a single purpose entity, the SPE structure provides its own advantages to real estate owners and investors.  By separating ownership of the subject real estate from the ownership of other properties and assets, that real estate is shielded from the downtown or bankruptcy of such other investments. Also, by owning just a single parcel of real estate, the SPE structure simplifies current and future purchases, financings, and sales of the property by eliminating unrelated and intertwined contractual obligations and interests.

In summary, it is often advisable for a lender to require that the owner of commercial real estate be structured as a single purpose entity. In addition, a single purpose entity structure can be worthwhile for commercial real estate owners and investors as an important method of asset and liability management and protection.

Withdrawal of the FLSA Independent Contractor Rule – Continuing Uncertainty

By: Karuna S Brunk

On May 6, 2021, the U.S. Department of Labor (“DOL”) announced that, effective immediately, it would withdraw the Trump-era “Independent Contractor Rule” (the “Rule”).  The Trump DOL had promulgated the Rule in an effort to instruct businesses on how to determine if a worker is an independent contractor or an employee, entitled to the protections outlined in the Fair Labor Standards Act (“FLSA”).

Background 

Generally, under the FLSA, all non-exempt employees are guaranteed a federally-established minimum wage and entitled to premium overtime pay for any hours worked over 40 in a workweek.  The FLSA specifically exempts independent contractors from its protections, and, thus, the FLSA’s minimum wage and overtime protections do not apply to independent contractors.  Historically, courts and the DOL have relied upon an “economic reality” test to determine whether an employment relationship exists between a worker and an employer.  The “economic reality” test was originally articulated in United States v. Silk, 331 U.S. 704, 712 (1947) and applied to the FLSA in Rutherford Food Corp. v. McComb, 331 U.S. 722 (1947).  The relevant factors include:

  • The extent to which the services rendered by the worker are an integral part of the employer’s business operations;
  • The permanency of the relationship;
  • Whether the worker has invested in his/her own facilities and equipment to perform the work;
  • The nature and degree of control by the employer;
  • The worker’s opportunity for profit or loss;
  • The amount of initiative, skill, judgment, or foresight required for the success of the worker; and
  • Whether the worker owns or operates an independent business organization.

These factors often resulted in inconsistent application with no bright line definition of employee or independent contractor.

The Rule was originally published on January 7, 2021, with an effective date of March 8, 2021.  It focused primarily on factors 4 and 5 – the nature and degree of control by the worker and the employer and the worker’s opportunity for profit or loss – with the idea that these factors ultimately determined whether an individual was an independent contractor or an employee.  Under the Rule, the other factors of the “economic reality” test would serve as guidance if the evidence relating to the two primary factors were not conclusive.

The Biden Administration changed course, first by announcing on February 5, 2021, that it would delay the Rule’s effective date, then on March 12, 2021, by proposing to withdraw the Rule, and, lastly, by ultimately withdrawing it altogether on May 6, 2021.   In its withdrawal announcement, the DOL reasoned that the Rule undermined the longstanding “economic realities” test in the court system.  Additionally, Secretary of Labor Marty Walsh noted that the DOL was concerned that the Rule would undermine worker rights – “too often, workers lose important wage and related protections when employers misclassify them as independent contractors.”

The Takeaway? 

The uncertainty and inconsistent application of the “economic reality” test continues.  Additionally, employers should be aware that the current DOL’s enforcement efforts will likely focus on the misclassification of workers – this is especially relevant for those workers in  in the “gig economy.”

FLSA violations come with steep penalties, including double damages (double the owed wages) and payment of a plaintiffs’ attorneys’ fees and costs.  These cases often are prosecuted on a class-wide basis and can wreak havoc on a business.  We recommend that employers review their employee and independent contractor classifications to ensure that they are not misclassifying workers.  Experienced employment lawyers at DiMonte & Lizak can audit your employment practices and proactively protect you from wage and hour lawsuits that could be around the corner.

The American Rescue Plan Act and What it Means for Employers

By Karuna S Brunk

On March 11, 2021, President Biden signed into law the American Rescue Plan Act (“ARPA”).  The ARPA extends Pandemic Unemployment Assistance from 50 weeks to 73 weeks through September 6, 2021 and extends Emergency Unemployment Compensation benefits from 24 weeks to 53 weeks; provides an additional $300 per week in weekly unemployment benefits through September 6, 2021; and provides additional funding to the Occupational Safety and Health Administration.  Two additional provisions of the ARPA are particularly important for employers.

First, ARPA requires that employers cover 100% of their employees’ cost of continuing group health coverage if the employee is involuntarily terminated and elects COBRA.  The government has justified its new requirements by subsidizing the cost for coverage through deductions on quarterly payroll filings.

On April 7, 2021, the U.S. Department of Labor (“DOL”) issued guidance implementing the ARPA:

  • The ARPA COBRA premium assistance requirements apply to periods of health coverage on or after April 1, 2021 through September 30, 2021 – that is, if an employee is receiving benefits in that timeframe, the employer is required to pay the premium for such benefits.
  • The ARPA COBRA benefits apply to employees who are involuntarily terminated or suffer a reduction in working hours for any qualifying reason. They do not apply to voluntary terminations.  Individuals and their dependents are eligible for ARPA COBRA assistance if they either (1) enrolled in COBRA and became eligible prior to April 1, 2021; (2) became eligible for COBRA prior to April 1, 2021 but did not previously elect COBRA when it became eligible to them; (3) elected COBRA prior to April 1, 2021 but let the coverage lapse; or (4) became eligible for COBRA benefits after April 1, 2021 through a qualifying event (involuntary termination).
  • Individuals are not eligible for the ARPA COBRA benefits if they are able to receive health insurance coverage through other options, for example, through another employer’s plan, a spouse’s plan, or if they are eligible for Medicare.
  • Generally, as noted above, the ARPA COBRA premium assistance extends from April 1, 2021 through September 30, 2021 but ends earlier if the employee becomes eligible for another group health plan or if the employee reaches the end of his maximum COBRA continuation coverage period. If the employee continues COBRA coverage after the ARPA COBRA premium assistance ends, he likely would have to pay the full amount of the premium coverage.  Notably, the ARPA does not lengthen the actual COBRA period – COBRA coverage for a covered employee generally lasts a maximum of eighteen (18) months.
  • The ARPA imposes new notice requirements on businesses and plan administrators to notify beneficiaries of their rights under the ARPA. The ARPA also requires that group health insurance plans and insurers provide individuals with notice of expiration of benefits.  The DOL has released the following model notices:

Additionally, the DOL provided a Summary of the COBRA premium Assistance Provisions under the American Rescue Plan Act of 2021 – APPENDIX TO § 2590 (dol.gov).  Employers should provide this notice to qualifying individuals along with one of the requisite COBRA notices.  The U.S. DOL also provided model notice of expiration of benefits to be provided before premium assistance under the ARPA is about to expire – Notice of Expiration of Period of Premium Assistance (dol.gov)

  • According to the DOL rules, an employer could be subject to a penalty of $100 per beneficiary, but not more than $200 per family, for each day that the plan or employer is in violation of the COBRA rules.

Second, the ARPA extends the availability of tax credits to businesses that allow their employees to take paid sick leave or emergency family and medical leave through September 30, 2021.  Although the ARPA adopts much of the leave language of the Families First Coronavirus Response Act (“FFCRA”), the ARPA does not require employers to pay employees for COVID-19-related leave.   That is – FFCRA paid leave is entirely optional for employers.  Under the ARPA, leave credits are renewed as of April 1, 2021.  As such, if an employer granted paid leave to an employee in October 2020, for example, it would receive a second set of tax credits if that same employee received COVID-19-related paid leave again in April 2021.  Additionally, the ARPA adds two additional qualifications for paid leave – (1) an “employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of COVID-19 and such employee has been exposed to COVID-19 or the employee’s employer has requested such test or diagnosis” and (2) “the employee is obtaining immunization related to COVID-19 or recovering from any injury, disability, illness, or condition related to such immunization.”

Much like previous federal government efforts to respond to the COVID-19 health crisis, the ARPA is complicated.  We recommend that employers contact a skilled and experienced employment attorney to proactively deal with the government’s “red tape.”

The PRO Act and What it Means for Employers

By: Karuna S. Brunk

On March 9, 2021, the U.S. House of Representatives passed a sweeping pro-union reform law that, if enacted, would dramatically change the dynamics between employers and workers. The Protecting the Right to Organize Act (the “PRO Act”) was previously introduced in the House but not debated in the Senate. Now it has reappeared as a priority of the Biden Administration.

In essence, the PRO Act’s purpose is to overhaul the National Labor Relations Act (“NLRA”) to strengthen labor unions and make it easier for workers to organize. If enacted, the PRO Act would bring numerous changes, including:

  • Effectively invalidating state “right-to-work” laws so that unionized workplaces could require the payment of union dues as a condition of employment – Employees who refuse to pay union dues could be subject to termination pursuant to “union security” clauses in collective bargaining agreements. While this might not affect Illinois employers because Illinois is not a right to work state, it will affect 27 other states, including Wisconsin.
  • Legalizing secondary strikes and boycotts such that neutral third parties would be subject to picketing and boycotts associated with labor disputes at other companies.
  • Broadening the definition of “employee,” making it difficult for workers to be classified as independent contractors – This could open the door for these workers to collectively organize. It also narrows the definition of “supervisor” to make it more difficult to exempt management employees from union coverage. More employers will also be considered “joint employers” even if they do not exercise direct control over another business’ employees.  This will substantially increase the risk of litigation for many franchised businesses.
  • Allowing “interest arbitration” by which, if an employer and union cannot reach agreement on the terms of an initial collective bargaining agreement, a federal arbitrator would decide the wages, benefits, and other relevant terms of the union agreement.
  • Bringing back the Obama-era “quickie” election rule allowing a union to hold elections only a few days after filing for recognition with the National Labor Relations Board (“NLRB”) – This severely shortens an employer’s time to prepare for elections, thereby increasing the likelihood of a unionized workforce. The PRO Act also gives the NLRB discretion to allow unions to determine the functions of election proceedings.
  • Dramatically increasing fines and penalties associated with unfair labor practices, including civil fines of $50,000 for each unfair labor practice, $10,000 for each violation of an NLRB order, requiring the re-hire of employees in discharge cases (mandatory injunctions), and personal liability for company directors and officers.

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These changes are merely the “tip of the iceberg.” It is unclear whether the PRO Act can overcome a Republican filibuster in the Senate. However, all private employers should be aware that the Biden Administration generally has instituted more union-friendly policies. Many may assume that the NLRA and the PRO Act only affect employers with existing collective bargaining agreements and relationships with labor unions. This is not the case – all private employers are affected because the NLRA impacts employee handbooks, employee contracts, and day-to-day communications with employees about wages and discipline, regardless of whether the employer is a union shop. As such, employers should evaluate and reconsider their labor relations policies in anticipation of a more labor-friendly NLRB and more labor-friendly NLRA rules and regulations. We recommend consulting with an experienced labor attorney at DiMonte & Lizak, LLC to discuss proactive changes to account for the changing political environment.

Illinois Set to Enact New Limitations on Criminal History Consideration for Employment Decisions and Equal Pay Requirements

By: Jonathan Ksiazek

On March 23, 2021, Governor Pritzker signed Illinois Senate Bill 1480, titled the Employee Background Fairness Act, into law. SB 1480 contains three new provisions that will impact employers in Illinois effective immediately.

The first big change for employers in SB 1480 involves additional steps when evaluating job applicants who have a criminal record. SB 1480 amends the Illinois Human Rights Act to require employers to determine whether there is either a substantial relationship between the conviction and the position sought. This evaluation must include a consideration of whether the employment position offers the opportunity for the same or a similar offense to occur and whether the circumstances leading to the conviction will recur in the employment position. The determination further must consider whether the granting of employment would involve an unreasonable risk to property or to the safety or welfare of specific individuals or the public. SB 1480 describes several factors employers must consider in making this determination.

Under SB 1480, if an employer determines that they will not be able to hire an individual based on their criminal record, the employer must give notice to the affected individual, engage in an interactive process, and consider information provided by the applicant about why the conviction should not be considered or be dispositive. This meeting must take place before a final decision is made to disqualify the applicant. In event that the employer disqualifies a candidate based on their criminal record after this meeting, it must provide additional information to the employee regarding the reasons for its decision.

Next, SB 1480 amends the Business Corporation Act to require each domestic or registered foreign corporation required to file an EEO-1 report with the Illinois Secretary of State to document the gender, race, and ethnicity of the corporation’s employees as part of its corporate reporting obligations. The Secretary of State will publish the gender, race, and ethnicity data of each corporation’s employees on the Secretary of State’s website. Employers will have to meet this new obligation starting on January 1, 2023.

Lastly, SB 1480 will require private employers with more than 100 employees to obtain an “equal pay registration certificate.” To obtain this certificate, an employer must provide the gender, race, and ethnicity data of its employees to the Illinois Department of Labor as well as the total wages paid to each employee during the prior calendar year.

The employer also must submit a statement signed by a corporate officer, legal counsel, or other authorized agent for each county in which the business has a facility or employees representing that a) The business is in compliance with Title VII, the Equal Pay Act of 1963, the Illinois Human Rights Act, the Equal Wage Act, and the Equal Pay Act of 2003; b) the average compensation for its female and minority employees is not consistently below the average compensation of its male and non-minority employees within each of the major job categories reported, accounting for certain factors; c) the employer does not restrict employees of one sex to certain job classification and makes retention and promotion decisions without regard to sex; d) wage and benefit disparities are corrected when identified; and e) the employer evaluates wages and benefits to ensure compliance with relevant statutes.

An employer who does not obtain a certificate or whose certificate is suspended or revoked after an IDOL investigation is subject to a mandatory civil penalty equal to 1% of “gross profits.” Existing corporations must obtain certificates within three years after the effective date of SB 1480 while new corporations must obtain certificates within three years after commencing operations. Recertification is required every two years.

DiMonte & Lizak, LLC will continue to monitor new employment law developments in Illinois as they arise.

Julia Jensen Smolka featured as Advocate of the Month!

Advocates Society, the association of Polish-American attorneys featured our very own Julia Jensen Smolka in their newsletter this month.

ADVOCATE OF THE THE MONTH: Julia Jensen Smolka

In an effort to better-acquaint readers with Members of the Advocate Society, we offer “Advocate of the Month.” This month, we feature a Question and Answer with Julia Jensen Smolka, who engages in the private practice of law, as a Partner with DiMonte & Lizak, LLC, in Park Ridge. Julia serves as a Member of the Public Relations Committee of the Society.

Why are you a member of the Advocates Society?

I joined the Advocates Society for good, old-fashioned networking. I have to market myself and find my own business. As an Associate, now Partner at the law firm of DiMonte & Lizak, LLC, our founder, Chet Lizak was a past-president of the Advocates. He spoke highly of the organization and of the lifelong friendships and relationships he built at the Advocates. About eight years ago, I attended a meeting with him as his guest. The meeting had everything – free beer, free CLEs and free pierogi. I have been returning ever since.

Give us an example of how being a member of the Advocates Society empowered you as an attorney.

I enjoy the laid back opportunity to network and earn CLE at the general meetings. I also enjoy that I am able to volunteer for the group as I am able – in writing articles for the newsletter, or assist on the marketing committee or previously with the Christmas parties and this year’s Christmas Charity Drive. Plus being an Advocate is a powerful item to put on any resume or biography. Everyone knows who the Advocates are!

What are you most looking forward to most in the coming year, personally/professionally?

This year is going to be challenging and hopefully action-packed. I have been an attorney for twenty years. I assist business owners on all types of matters, including commercial contract and collection issues, debtor/creditor workouts and collections, bankruptcy and landlord tenant issues. So like so many other attorneys, COVID has stumped us as to what is going to happen. I was ready for the predicted onslaught of bankruptcies, but 2020 had the lowest filings nationally of bankruptcies since 1985. I am taking frantic calls from small landlords who cannot afford to wait for the residential eviction moratorium to end. So like so many attorneys, I am reading every executive order from the governor, the Supreme Court and the local courts, so I can be of service to my clients. Personally, my husband is a teacher, and I have two daughters in grade school, and we are just all hanging in there, trying to make the most of the forced family time while not driving each other crazy. I look forward to warmer weather, seeing some live music and taking a trip or two.

Tell us something interesting about you.

I have been at the same firm for my entire practice – 20 years. The firm is in Park Ridge, right off the Kennedy Expressway. I grew up and lived walking distance away, in Norwood Park. When I saw the job posting in the Loyola Law School newsletter the summer while I was studying for the bar, I applied even thought they were looking for someone with 1-3 years of experience. In my cover letter (remember those) I put down that “I could practically see your front door from my window” That got me the interview. Later they joked that they needed someone close by to shut off the security alarm when it was tripped overnight.

Julia can be reached at jsmolka@dimontelaw.com. Sto lat!

advocatessociety.com

Myths About Wills

attorney, estate planning, wills, probateBy: Paul S. Motin, JD, LLM, CPA

Face it.  Most people don’t want to consider the fact that they are not immortal.  Unless a person can be convinced there is great benefit to planning for the inevitable demise, he or she will think up any excuse for not having a Will or other estate planning documents prepared.  Unfortunately, there are many misconceptions about the estate planning process and the probate process that follows.  Until these myths are dispelled, the person will believe, often wrongly, that he or she does not need or should not have a Will.

Myth No. 1: “I don’t have enough assets to make a Will” (or “I don’t need a Will.”)

While some attorneys don’t like to admit it, it’s true that not everyone needs a Will.  State law will determine methods for administering your estate, for distributing your assets, and for appointing someone to take care of your children.  However, in many cases, State law will not result in the same outcome as what is desired.  A valid Will can make certain that your intentions are followed and it can make handling your assets after your death much easier.

In order to determine whether a person needs a Will, it’s important to realize what will occur if no Will exists.  For purposes of this discussion, assume you are married, have two young children (one from that marriage and a stepchild from your spouse’s prior marriage) and are a resident of Illinois.  Your total assets include your home (which you bought in your own name (not jointly) and which is worth $400,000) plus $300,000 in cash.  Most people in this situation that I have worked with hope (and usually expect) that, upon their death, all of the assets will go to the surviving spouse. Unfortunately, Illinois’ intestacy laws (and probably most states’ laws) provide for a different distribution.

In Illinois, if a person dies without a Will and leaves a spouse and at least one child (and ignoring certain minimal allowances), the surviving spouse will be entitled to 50% of the decedent’s estate.  The decedent’s child (but not the stepchild) will be entitled to the remaining 50%.  This can be problematic as the results of the example show: You had a total of $700,000 in assets.  Your surviving spouse is entitled to $350,000 and your child is entitled to the remaining $350,000.  With the house being worth $400,000, your spouse cannot receive the house outright from the spouse’s share.  This could result in your surviving spouse having to buy out part of your child’s share and none of the cash would go to your spouse.  Alternatively, the house could be split between the spouse and child as tenants-in common; though, this is cumbersome, especially if the house needs to be refinanced or sold in the future.

An additional problem that results is that a Guardian of the Estate for the child will likely need to be appointed by the Court to manage the child’s share until the child attains age 18.  The Guardian of the Estate will need to file annual reports and annual accountings with the Court on an annual basis.

There are “Will Substitutes” which will control over intestacy laws (and over Wills, too) which may be used to avoid the intestacy distribution rules.  These include holding assets in joint tenancy or tenancy by the entirety, trusts, “Transfer on Death Instruments” (“TODI”), and “Pay on Death” or “Transfer on Death” designations on bank and investment accounts.  In the above example, the harshness could be somewhat avoided by placing all of the assets in joint tenancy.  This would result in all of your joint assets going to the surviving spouse.  Upon that spouse’s death, the assets would pass to your spouse’s surviving children (although, note that a probate will still be necessary upon the surviving spouse’s death if the designations are not changed).  However, as discussed in the following paragraphs, Will Substitutes might cause inequities if no children survive both you and your spouse.  Another “problem” with Will Substitutes is that a person cannot be certain that he or she will outlive the intended beneficiary.  A Will can determine where the assets will go if the beneficiary dies first.

Illinois law provides that, if you have no surviving spouse, your assets will be divided evenly between your children (but not a stepchild) with the descendants of a deceased child taking the child’s share.  If you have no surviving children or descendants, your parents and siblings take your assets.  If none of these relatives exist, then the assets pass to other, more distant, relatives.

The result of these rules may be very harsh.  Let’s say you amassed a small (or great) fortune, were married recently and have no children.  If you die, your assets pass to your spouse.  If your spouse then dies without a Will, those assets will pass to your spouse’s family, with your family receiving nothing, regardless of what may have been intended.  Short of having a trust prepared, or very careful use of Pay-on-Death, Transfer on Death and TODI designations, this result will not be avoided without a Will.

In addition to being able to determine the distribution of your assets, a Will should ease the burden of the probate process.  Assets could easily be tied up for a year or, quite often, much longer.  A clearly drafted Will can definitely help.  The Will can name your Executor (the person who handles the affairs of the probate estate), can nominate a person to be the guardian for your minor children, can instruct the Executor as to what to do with certain properties (e.g., should certain assets be sold or should they be transferred directly to the children?), can eliminate any statutory bond that may otherwise be required, and can even create trusts or make distributions according to a written formula so that estate taxes may be minimized.

It is usually best to have a Will.  The cost of a simple Will is usually not prohibitive.  In the event of a probate, just having the Executor named in the Will and providing in the Will that a surety bond is not necessary will usually save more than the cost of the Will.  [I caution against attempting to prepare a Will yourself (even if done with a computer program).  Qualified estate planning attorneys are much more able to spot problem areas than a form book or computer program; plus, there are certain formalities required by law regarding, for example, the signing of the Will, the revocation of prior Wills and the terminology to be used.  Because of the increased possibility of a Will contest, having an incorrectly worded Will can often cost much more to administer than if there were no Will at all.]

Myth No. 2: “The State takes my assets if I don’t have a Will.”

Generally, this is untrue.  Other than Court filing fees, if you have any living relatives that can be located (and that will accept your assets), the closest relation to you will take your assets.  Only if you have no relatives at all will the State take your assets.

There is a Federal Estate Tax for people dying with more than $11.7 million (as of January 1, 2021) and Illinois has an Estate Tax for people dying with more than $4 million.  Having Wills or other estate planning can often reduce these taxes significantly, if not eliminate them altogether.

Myth No. 3: “If I have a Will, my estate will have to be probated” (or “If I have a Will, I will avoid probate.”)

Having or not having a Will has no direct effect on whether an estate must go through the court probate process.  What is most important is the amount and type of assets owned by the decedent.  The primary purposes of probate are to determine the validity of a Will, if any, to determine the proper distribution of assets (whether by the terms of a Will or by intestacy laws), to properly retitle the assets to the recipient’s name, and to settle any and all claims and debts against the decedent and the estate.

“Probate” does not usually affect “non-probate” assets, such as joint tenancy property, life insurance payable to a named beneficiary, trust assets, assets held in a Pay-on-Death or Transfer on Death designated account, TODI property, etc., and thus, if these are the only assets owned, a probate will generally not be necessary.  In addition, if a decedent has $100,000 or less of probate assets (other than real property), a probate may be avoided by using a Small Estate Affidavit.

If probate assets exceed $100,000, and if assets must be retitled, probate will almost always be necessary.  In addition, anytime the decedent owns real estate in his own name at the time of death, some form of probate proceeding will be necessary to transfer ownership.

Having a Will might have an indirect effect on whether an estate must be probated.  Assume you have two children, no debts and $150,000 worth of assets that don’t need to be retitled (e.g., cash, jewelry, equipment, furniture, etc.).  You want two-thirds to go to one child and one-third to go to the other and you have a Will which states this.  When you pass away, each child’s share is readily determinable.  If neither child wants to contest the Will, and if the children are certain that no creditors exist, they could agree between themselves to distribute the assets according to the Will without going to court.

Conclusions:

Generally, most people who own assets worth more than $100,000 or any real estate should have a Will.  While there are some small exceptions to this general rule, the benefits of having a Will will almost always be greater than the small cost involved.  You should contact a qualified estate planning attorney for more information and for document preparation.

Lien On Me: Understanding the Commercial Real Estate Broker’s Lien Act

By: Julia Jensen Smolka

Regardless of COVID-19, the real estate market is hot.  With money being cheap, there will be more and more real estate transactions. With more transactions, there will be more instances where sellers and brokers argue whether a commission was earned by a broker. With larger commercial price tags, a broker could be out tens of thousands of dollars—or significantly more if there is a dispute. Broker’s listing agreements are typically well written form contracts which address when a commission is earned by a broker. But there is even a more powerful tool in Illinois which allows brokers to attach a lien to a commercial property for earned, but unpaid commissions.  The lien could halt a sale.

Illinois allows real estate brokers to place liens for earned commissions on commercial real estate as a way to force payment when a seller or buyer attempts to circumvent payment to the broker. The act is known as the Commercial Real Estate Broker Lien Act, 770 ILCS 15 et. seq. This article addresses the basics on how the act works.

Step 1: Does the Broker Have A Lien?

To know whether the act applies to you, first you have to determine if the property at issue is covered under this act. There are many instances where a property is being used for commercial purposes; however, the act specifically defines what properties are covered.

Under Section 5 of the Act, “Commercial Real Estate” is defined as any real estate located in Illinois other than (i) real estate containing one to six residential units, (ii) real estate on which no buildings or structures are located, or (iii) real estate classified as farmland for assessment purposes under the Property Tax Code.

Next, whether the broker has a lien depends on whether the broker has earned his or her commission under a written instrument signed by either the owner, buyer, or tenant. That written instrument is typically a listing agreement, lease, or sales contract. For the broker to have earned his or her commission, he or she has to produce a ready, willing and able buyer or tenant.

A prospective purchaser of realty will be considered ready, willing, and able to buy if he has agreed to purchase the property and has sufficient funds on hand or if he is able to command the necessary funds with which to complete the purchase within the time allowed by the offer. A broker who shows he produced a prospective purchaser who agreed to the sellers’ terms, who was continuously willing to purchase during the time of the relevant negotiations and became able to execute a contract upon the agreed terms at a reasonable time subsequent to the initial negotiations, has made a prima facie case for recovery of his commission.

Step 2: Perfecting the Broker’s Lien

If you have a right to record a lien, the statute describes what needs to be in the lien notice—names of the owner, description of the property, amount of lien and real estate broker’s license number. It has to be signed and verified.  To perfect the lien, the client has to record a lien in the Recorder’s office of the county where the property is located. Thereafter, the broker shall send notice to the owner.  Strict compliance is required, or the broker lien is not enforceable. So, ideally, if the broker sees the writing on the wall that the parties are trying to avoid paying the commission, he or she can record their lien prior to the closing. It forces the title company to holdback funds, as it would for any other lien.

Step 3: Foreclosing the Broker’s Lien

This statute operates similar to the Illinois Mechanics Lien Act. Like the Mechanics Lien Act, the broker has to strictly comply with the statute, and has to file a foreclosure complaint within two years after recording the lien. Similarly, like with a mechanics lien, an owner can make a 30-day demand to file suit. In the event the suit is not instituted within the 30 days of demand, then the lien will be extinguished as matter of law. If the broker is successful, the statue allows for his or her recovery of attorney’s fees and costs. If he is unsuccessful, the judge can award attorney’s fees and costs against the broker.

Summary

Having filed both broker lien actions and mechanics lien actions in my career, the procedural steps are very similar. So are the pitfalls if you fail to follow the statute precisely. Defending these actions are very similar. Strict compliance to the dates, notices, and forms of the documents in this statute is necessary, or the foreclosure complaint will be dismissed.  If you are a commercial real estate broker, or if you have a commercial property and have questions, please feel free to call us.

The “New-Default Rule” Saves Lenders from the Harsh Results of the Single Re-Filing Rule

By Thomas J. Cassady

On September 21, 2020, the Second District Appellate Court issued its opinion in Wilmington Savings Fund Society v. Barerra, 2020 IL App (2d) 190883, which gave lenders and mortgagees some relief from the harshness of the Illinois Supreme Court’s 2018 Cobo decision based on the “single re-filing rule.”

On November 29, 2018, the Illinois Supreme Court issued its decision in First Midwest Bank v. Cobo, 2018 IL 123038, holding that a foreclosing mortgagee who has voluntarily dismissed its foreclosure twice cannot re-file a third time on the same default, pursuant to 735 ILCS 5/13-217, often known as the “Single Re-Filing Rule.” Many lenders in the height of the 2008 foreclosure crisis voluntarily dismissed foreclosures for various reasons such as service transfers or pending mortgagor bankruptcies, and when the lender tried to re-file its foreclosure a third time, it was barred forever due to the Illinois Supreme Court’s strict application of the single re-filing rule in Cobo.

In Barrera, the Second District provided some relief from the Illinois Supreme Court’s unforgiving interpretation of the single re-filing rule. The foreclosing plaintiff in Barrera had previously filed three foreclosure complaints, all based on the mortgagors’ failure to make principal and interest payments. Two of those foreclosures were voluntarily dismissed, and the third was involuntarily dismissed when the Circuit Court applied the single re-filing rule. The mortgagee then filed another foreclosure based on a non-monetary default: the borrower’s failure to make real estate tax and hazard insurance payments, as well as failure to reimburse the mortgagee for tax and insurance payments made on the borrowers’ behalf. In addition to defaulting on principal and interest, the mortgagors therefore defaulted in four new ways: 1) failure to pay real estate taxes to the county 2) failure to pay hazard insurance; 3) failure to reimburse for taxes paid; and 4) failure to reimburse for insurance paid.

The Circuit Court of the Nineteenth Judicial Circuit in Lake County dismissed the new complaint based on the tax and insurance default.  The Circuit Court found that the tax and insurance complaint was based on the same default as the previous complaints, which were based on principal and interest default.  Crucially, the Circuit Court in Barrera determined that the complaint based on the tax and insurance default “arises from the same single group of operative facts” as the prior three complaints based on the principal and interest default.  The Circuit Court came to this conclusion by analyzing the River Park “transactional test” set out in River Park, Inc. v. City of Highland Park, 184 Ill. 2d 290, 302 (1998), and re-affirmed in Cobo in 2018.  The River Park test states that res judicata (the standard used for identifying whether the single re-filing rule has been violated) bars not only those claims that were actually decided in the prior proceedings, but also those that could have been decided. The Circuit Court in Barrera found that the mortgagee could have requested the taxes and insurance payments due in its prior complaints which were based on the principal and interest default.

On appeal, the mortgagee argued that 2018 tax and insurance payments could not have been adjudicated in 2012-2015 when the prior complaints were filed and prior default on principal and interest declared. The default as to tax and insurance payments only arose after the first three complaints had been dismissed, and therefore the “new default” could not have arisen prior to 2018. The Second District Appellate Court agreed and reversed the Circuit Court, finding that the “new default” rule applies when there are separate ways that a mortgagor can default under the terms of the mortgage, and a “new default” occurred subsequent to prior case dismissals. In Barrera, the Court held that a “new default” existed when the mortgagor failed to make tax and insurance payments after the prior complaints based on principal and interest were dismissed.  The most recent foreclosure (as to the tax and insurance defaults) alleged a separate, subsequent default and therefore did not violate the single re-filing rule.  The Second District therefore respected the fact that a mortgage contains many promises by the mortgagor and even if one is found to be unenforceable, the other promises are still in effect for the life of the lien. The operative facts contained in the 2018 complaint were that the tax and insurances payments were not made after dismissal of the prior complaints based on principal and interest.  Therefore, the Appellate Court held that the “operative facts” of the 2018 complaint for purposes of the River Park transactional test were not the same as the “operative facts” of the three previously-dismissed complaints.

The Barrera decision is a life raft for mortgagees who have previously voluntarily dismissed two foreclosures and are therefore procedurally prevented from bringing a third based on the single-refiling rule and the Cobo decision. Mortgagees can now confidently declare a default and file a new complaint based on language in the mortgage requiring acts other than the payment of principal and interest payments, without running afoul of the single re-filing rule. The careful practitioner will closely read the mortgage at issue to determine if any of the following common default provisions are included: failure to make tax payments to the county, failure to reimburse for tax payments to the county, failure to make hazard insurance payments, failure to provide proof of the mortgagors’ hazard insurance, failure to reimburse the lender for hazard insurance payments on the mortgagors’ behalf, and transfer of the property without the mortgagee’s permission, among many other possible provisions.  Each mortgage is different, and each may contain separate default provisions beyond payment of principal and interest. If a mortgagee has already dismissed two foreclosure complaints and has been unable to enforce its mortgage lien, counsel should examine the loan documents to determine the entire range of promises made by the mortgagor and new avenues for declaring a default that may have arisen after the dismissal of those complaints based on principal and interest.

The Secure Act – Congress Just Moved the Goalposts

By Patrick D. Owens

The Setting Each Community Up for Retirement Enhancement (SECURE) Act passed Congress on December 20, 2020, effective January 1, 2020[i].  By now most of us are aware of the important terms of the latest federal tax hike/money grab legislation, but here’s a summary of some of the major points to be aware of:

  • Employer Incentives. Adds a $500/per year general business tax credit for employers with no more than 100 employees receiving at least $5,000 in compensation for the preceding year (among other modifications to encourage employers to encourage tax deferred saving)[ii];
  • Employee/Student Incentives. Treats an amount includible in income and paid to the individual to aid in the pursuit of graduate or postdoctoral study or research (fellowship, stipend, or similar amount) as compensation allowing graduate and postdoctoral students use of an IRA[iii];
  • IRA Contributions. Repeals the prohibition on deductible contributions to a traditional IRA at age 70.5 but reduces the qualified charitable distribution (QCD) exclusion by the excess of the allowed IRA deduction[iv];
  • Part-Time Workers. Allows long-term, part-time workers who work for at least 500 hours per year with an employer for at least three consecutive years to participate in their employer’s qualified retirement plans[v];
  • Birth or Adoption Distributions. Provides an exception to the 10% early withdrawal tax for qualified birth or adoption distributions capped at $5,000[vi];
  • Lifetime RMDs. Increased required minimum distribution age to 72[vii];
  • Extra Time for Adoption of Plan. Provides that an employer may elect to treat a qualified retirement plan adopted after the close of a taxable year but before the employer’s tax return is due (including extensions) as having been adopted as of the last day of the taxable year[viii];
  • 529 Distributions for Loan Repayment. Provides that tax-free treatment for higher education expense distributions also applies to expenses for registered apprenticeship program’s required fees, books, supplies and equipment and qualified education loan repayments of up to $10,000[ix];
  • Kiddie Tax. Strikes the TCJA amendment to the tax rates under the kiddie tax (which effectively applied ordinary and capital gains rates of trusts and estates to the net unearned income of a child).  The old kiddie tax rules apply starting in 2020[x].
  • Postmortem RMDs. After death distributions of an IRA or defined contribution plan must be completed within 10 years after the death of the employee/participant.  There is an exception for eligible designated beneficiaries (EDBs) discussed below[xi].

This article focuses on planning for this last point, some of the nuances, and practical ideas for implementation.  While most estate planning attorneys are now trying to grasp the new Illinois Trust Code, we now must also deal with the modified retirement plan rules.

If the beneficiary of a retirement account is more than 10 years younger than the deceased retirement account owner, then all remaining assets must be distributed by December 31st of the year that contains the 10th anniversary of death, unless the beneficiary is the spouse, disabled or chronically ill, or a minor child[xii].  This is huge change in the law that previously allowed designated beneficiaries to withdraw the retirement account over their remaining life expectancies under the IRS tables.  Note that under the new rules, the beneficiary has the option, but does not need to withdraw anything until the end of the 10th year after death which could effectively be 11 tax years.

The SECURE Act keeps the existing statutory framework for required minimum distributions but modifies the general rule for designated beneficiaries (DBs) to a 10-year rule whether the death was before or after the required beginning date.  The limited exception to the general rule where a beneficiary may use his life expectancy applies only to EDBs, however, at the death of the EDB, the 10-year rule then applies.  Let’s first review the general rules and then apply those rules to both designated beneficiaries and nondesignated beneficiaries[xiii].

Designated Beneficiary (DB).  An individual, or individuals, or a trust that qualifies as a see-through trust (i.e. a conduit trust or an accumulation trust) is a DB.  The definition of DBs stayed the same.

Nondesignated Beneficiary (NDB).  The estate, charities, or a trust that does not qualify as a see-through trust is a NDB.  The rules did not change for NDBs so that the existing rules of a 5-year payout requirement for pre-RBD deaths or the remaining life expectancy method of the participant apply for post-RMD deaths.  Note that under the IRS tables and likely new IRS tables, the life expectancy of someone between ages 70 and 80 is longer than 10 years.  This may lead to an odd situation where your client may not want a designated beneficiary (e.g. a trust that qualifies as a see-through trust will have the 10-year distribution while an NDB may use the ghost life expectancy if the death was after age 72).  The IRS will need to clarify this discrepancy.

Eligible Designated Beneficiary (EDBs).  A participant’s spouse, minor child, any disabled or chronically ill individual, or any individual not less than 10 years younger than the participant is an EDB.

  1. Spouses

A surviving spouse is one of the EDBs.  The surviving spouse still has the option to roll over the benefits to his own IRA.  If the surviving spouse does not roll over the benefits, then he must start taking annual RMDs by the later of the year the participant would have reached age 72 or the year after the participant’s death.  As a practical matter, most spouses over age 59.5 will rollover the IRA to their own.  Only spouses under age 59.5 who need to withdraw funds without a penalty would likely set up the IRA as an Inherited IRA.  At the surviving spouse’s death, the 10-year rule applies.

  1. Disabled or Chronically Ill

A DB who is disabled (within the meaning of section 72(m)(7)) is an EDB.  An individual shall be considered to be disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration.  A DB who is chronically ill (within the meaning of section 7702(b)(c)(2) is also an EDB.  An individual shall be determined to be chronically ill if there is a certification that the period of inability is an indefinite one which is reasonably expected to be lengthy in nature.  For benefits left in trust to these EDBs, each may use their life expectancy if the disabled or chronically ill beneficiary is the sole lifetime beneficiary of the trust.  After the EDB’s death, then the 10-year rule applies.

  1. Minor Children

A child of the participant who has not reached majority is an EDB.  In Illinois, the age of majority is 18, although there is some confusing and unexplained language referencing a regulatory exception for a child who has not completed a specified course of education and is under age 26.  After age of majority, the 10-year rule applies.  For the life expectancy method to be used for a minor child, a conduit trust will likely need to be used.  The conduit trust requires that all RMDs must be distributed to the trust beneficiary[xiv].  Therefore, benefits left to a minor child can be taken out over the minor’s life expectancy until age 18, and thereafter, the 10-year rule applies, so all benefits must be withdrawn by age 28 (until the IRS explains the confusing language).  Note that this exception applies only to a minor child, not a grandchild or other relationship.  Finally, a practical unanswered question is what happens if the benefits are left to a pot trust for the benefit of multiple minor beneficiaries?

  1. Less Than 10-Years Younger Beneficiary

The last EDB is a beneficiary who is not more than 10 years younger than the participant.  As with the other EDBs, at the death of the EDB, the 10-year rule applies.

Practical Considerations and Other Planning Opportunities

Trust as Beneficiary. Do you have to revise all of your trusts named as a DB?  No, each trust will continue to qualify as either a conduit trust or an accumulation trust if drafted properly, however, the tax effect of the distribution will likely need to be reviewed.  The conduit trust will require full distribution of the benefits after the end of the 10-years or 10-years after the age of the majority of a minor.  This potential concern must be weighed against the fact that if an accumulation trust is named, income is taxed at the highest trust income tax rates of 37% after $12,950 in income.  A potential planning idea may be to consider spray trusts that may allow the trustee to distribute to multiple beneficiaries or multiple generations of beneficiaries to spread out the income tax burden, which then raises other practical and fiduciary liability concerns, however, the remainder trust beneficiaries are no longer a concern for calculating the RMDs.

Life Insurance. Consider additional term insurance for clients with minor children.  This should have been a topic discussed before the SECURE Act and maybe becomes a more important topic now.   Also consider additional insurance to cover the expedited income tax payments due now that the life expectancy payouts no longer apply.

Charitable Remainder Trust (CRT). For clients who are already charitably inclined, consider leaving the benefits to a CRT for both income tax deferral benefits and charitable gifting.  There are numerous specific requirements for CRTs and so you must be cautious with this structure which may not work for young beneficiaries[xv].

Conversion to Roth IRA During Life. For certain clients, especially those subject to either federal estate tax or Illinois estate tax, consider the conversion of a Traditional IRA to a Roth IRA.  You will need to run the numbers through various calculators[xvi], but you may find that the 10 years of tax-free growth after death and tax free distributions may work out to your clients’ benefit.

[i] H.R. 1865 – Pub. L. No. 116-94

[ii] IRC §45E

[iii] IRC §219

[iv] IRC §219(d), §408(d)(8)(A)

[v] IRC §401(k), §410

[vi] IRC §72(t), §401 – 403, §408, §457, §3405

[vii] IRC §401(a)(9)

[viii] IRC §401(b)

[ix] IRC §221(d)(1), §529(c)

[x] IRC §1(j), §55(d)(4)

[xi] IRC §401(a)(9)

[xii] IRC §401(a)(9)(B)

[xiii] For more detailed information see Natalie Choate’s website at www.ataxplan.com.

[xiv] See e.g., Treas. Reg. 1.401(a)(9)-5, A-7(c)(3), Ex. 2

[xv] See generally Professor Christopher Hoyt who has written extensively on this subject.

[xvi] See e.g. www.leimbergservices.com/wdev/analyzerssa.cfm

Personal Jurisdiction Over Nonresidents Gets a Shot in the ‘Long-Arm’

By Jonathan R. Ksiazek

In Illinois, the exercise of personal jurisdiction over nonresident defendants is authorized under the “long-arm” statute found in section 2-209 of the Code of Civil Procedure (735 ILCS 5/2-209 (West 2012)). The United States Supreme Court has held that the federal due process clause permits a state court to exercise personal jurisdiction over a nonresident defendant only when the defendant has “certain minimum contacts with [the state] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ ” International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278 (1940)).

For a forum to exercise specific jurisdiction consistent with due process, the defendant’s litigation-related “conduct must create a substantial connection with the forum State.” Walden v. Fiore, 571 U.S. 277, 284 (2014). To establish this substantial connection, the plaintiff must show that (1) “the defendant purposefully directed its activities at the forum state” and (2) “the cause of action arose out of or relates to the defendant’s contacts with the forum state.” Russell v. SNFA, 2013 IL 113909, ¶ 40.

While the internet has presented a wrinkle in the personal jurisdiction analysis, the general framework has not changed, as the “ultimate analysis is what it has always been—whether the quality and nature of the defendant’s contacts with the forum are such that it is fair and reasonable to assert personal jurisdiction.” Innovative Garage Door Co. v. High Ranking Domains, LLC, 2012 IL App (2d) 120117, ¶ 20.

Four recent state and federal cases show the difficulty in applying this standard.

In Dixon v. GAA Classic Cars, LLC, 2019 IL App (1st) 182416, the plaintiff, an Illinois resident, saw an online ad from GAA, a North Carolina corporation, listing a 1973 Ford Bronco for sale. Dixon and GAA exchanged multiple e-mails and text messages about the car and spoke on the phone regarding an auction of the Ford Bronco on two occasions. Dixon won the auction for the Bronco. When Dixon received the Bronco on May 13, 2018, he realized that it required a significant amount of repair. Dixon brought a lawsuit alleging fraudulent misrepresentation against GAA in Illinois, and GAA challenged the court’s jurisdiction over GAA. In September 2019, the Illinois appellate Court in Dixon found that Illinois courts had jurisdiction over GAA because GAA’s ad and website were sent into Illinois and GAA had multiple phone calls, text and e-mails with Dixon before he purchased the Bronco.

A month after the Dixon case, the appellate court issued a decision in Zamora, Jr. et. al v. Lewis, et al. 2019 IL App (1st) 181642-U. The facts in Zamora involved homeowners in Maine who created an AirBnB account and rented their property to an Illinois resident. During the renter’s stay, a child accidentally set a couch on fire resulting in the death of another child. The communications between the homeowners and renters were minimal and occurred through the AirBnB website. The Appellate Court in Zamora found that the court did not have jurisdiction over the homeowners in Maine because they never directly advertised or solicited business in Illinois and only rented their home to one Illinois resident. The most important factor in Zamora was that the parties had one minimal contact as compared to the repeated, multiple contacts between the parties in Dixon.

Federal Courts have also recently examined long-arm jurisdiction. Judge Feinerman recently examined the Northern District of Illinois’ jurisdiction over an out-of-state bitcoin exchange in Greene v. Karpeles, 2019 WL 1125796, N.D. Ill. March 12, 2019. In Greene, the online bitcoin exchange website allowed users to create an account and agree to terms of use. The plaintiffs in Greene were two of over 7,000 Illinois residents who created user accounts on the exchange. The bitcoin exchange communicated regularly with the plaintiffs about their accounts before the exchange shut down in February 2014. The court thus determined that Defendants subjected themselves to jurisdiction by operating a website that allowed Illinois users to submit payment online in exchanges for goods and services and encouraged users to create and maintain accounts.

Lastly, the Seventh Circuit most recently weighed in on the jurisdiction issue in Matlin v. Spin Master Corp., 921 F.3d 701 (7th Cir. April 22, 2019). The Plaintiffs, Illinois residents, co-founded a company that made products whose royalty rights which were subsequently acquired by Spin Master, a Canadian company. The Plaintiffs alleged that they were owed unpaid royalties from Spin Master. In response to a motion to dismiss for lack of jurisdiction, Plaintiff’s counsel submitted a purchase receipt showing he bought a single patented product in Illinois. The Court in Matlin found that the court lacked jurisdiction over the defendant because there was no systematic contact with the forum state through repeated sales of a regulated product, and that the case did not arise out of Spin Master’s contacts with Illinois because nationwide royalties were at issue.

These cases show that in the context of internet-based businesses repeated, systematic contacts with a forum state will likely result in a finding of proper jurisdiction under the long-arm statute. However, minimal contacts with a forum state or a lack of connection to the claim at issue will very often result in a lack of jurisdiction.

U.S. Supreme Court Extends Federal Protections for LGBTQ Employees. What does it Mean for Illinois Employers?

By Karuna S. Brunk

On June 15, 2020, the U.S. Supreme Court released its decision in Bostock v. Clayton County, Georgia, holding that Title VII of the Civil Rights Act of 1964 (“Title VII”) protects gay, lesbian, and transgender employees from discrimination based on their sexual orientation and gender identity.  The majority opinion was authored by Justice Neil M. Gorsuch and held that an employer violates Title VII when it discriminates against an employee on the basis of the employee’s sexual orientation or gender identity – “[a]n employer who fired an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex.  Sex plays a necessary and undisguisable role in the decision, exactly what Title VII forbids.”

The Illinois Human Rights Act has explicitly prohibited employment discrimination and harassment on the basis of sexual orientation and gender identity for several years.  What should employers do to avoid lawsuits and to make the workplace more fair and welcoming to all employees?

1.   Establish clear policies that prohibit discrimination. Update employee handbooks and equal employment opportunity policies to specifically state that discrimination based on sexual orientation and gender identity is prohibited in the workplace. Consider revising policies to be more gender neutral – for example, dress code policies should not require women to wear skirts and men to wear pants.

2.   Provide sexual harassment prevention training. Effective January 1, 2020, every employer in the State of Illinois must provide annual sexual harassment prevention training to all employees. This training should encompass discussions of harassment based on sexual orientation or gender identity.

3.   Communicate with employees. Be open to conversations with employees regarding how they want to be addressed or recognized by their colleagues and supervisors. We suggest that you document these conversations.

4.   Workplace investigations and remedial measures. As part of your anti-discrimination and anti-harassment policies, be ready to thoroughly investigate and address all claims of harassment or discrimination based on sexual orientation or gender identity.

As always, we recommend that you contact a qualified employment attorney as you update your policies and respond to employee relations issues.  Additionally, our firm provides comprehensive sexual harassment training to businesses of all sizes to bring them into compliance with Illinois law.

What You Should Know About the Paycheck Protection Program Flexibility Act

By Jonathan R. Ksiazek

On June 5, 2020, the President signed into law the Paycheck Protection Program Flexibility Act of 2020, H.R. 7010 (the “Flexibility Act”). The Flexibility Act amends the CARES Act and makes significant changes to Small Business Administration (“SBA”) rules relating to the Paycheck Protection Program (the “PPP”). This article contains a summary of the changes that the Flexibility Act makes to the CARES Act and describes how small businesses can use this flexibility when reopening their businesses.

Use of PPP Loan Proceeds

Previously, under the CARES Act and SBA guidance, at least 75% of the proceeds of a PPP loan had to be used for covered payroll costs. Now, under the Flexibility Act, borrowers must only use at least 60% of their PPP loan proceeds for covered payroll costs, and may use up to 40% of their loan proceeds for payment of covered non-payroll costs, including payment of interest on covered mortgage obligations, payments of covered rent obligations, and covered utility payments.

On Monday, June 8th, U.S. Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza released a joint statement regarding the passage of the Flexibility Act. In this statement, Secretary Mnuchin and Administrator Carranza explained that the new 60% requirement will not be a cliff. This means that if a borrower spends less than 60% of the PPP loan amount for expenses that otherwise would be forgivable, then that borrower will still get some forgiveness, instead of no forgiveness.

Extension of Covered Period

The CARES Act originally provided for an eight-week covered period beginning on the origination date of the loan for determining the amount of a PPP loan that will be forgiven. Under the Flexibility Act, the covered period now:

  • Begins on the origination date of the loan (which SBA has indicated will be the date loan proceeds are disbursed), and
  • Ends the earlier of:
    • the date that is 24 weeks (168 days) after the loan origination date, or
    • December 31, 2020.

Borrowers who received loans before June 5 may elect to continue to use their eight-week covered periods under the original CARES Act provision if they wish. The SBA’s Interim Final Rules permit borrowers who pay employees on a bi-weekly or more frequent basis to elect to use an eight-week “alternative payroll covered period” that begins on their first payroll date following disbursement of their loans.

Extension of Safe Harbor Deadline for Reductions in FTEs or Salaries/Wages

The CARES Act originally provided for a decrease in the forgiven amount of a loan based on the extent of reductions in full-time employees (“FTE”) or salary/wage levels during the covered period.  Previously, the borrower could avoid the decrease in forgiveness if it restored FTE and salary/wage levels to their February 15 levels by no later than June 30. Now, under the Flexibility Act, the safe harbor deadline for eliminating reductions in FTE and salary/wage levels is now extended to December 31.

Additional Safe Harbor for Reductions in FTEs

The Flexibility Act also added a further provision providing that the forgiven amount of a loan will be determined without regard to a reduction in FTEs that is due to:

  • An inability to both
    • rehire individuals who were employees on February 15, and
    • hire similarly qualified employees for unfilled positions on or before December 31;

or

  • An inability to return to the same level of business activity at which the borrower was operating before February 15 due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the CDC, or OSHA during the period of March 1 through December 31, related to maintenance of COVID-19-related standards for sanitation, social distancing or any other worker or customer safety requirement.

To qualify for this additional safe harbor, borrowers must document in good faith their inability to rehire or hire employees, or to return to their pre-February 15 level of business activity and provide that documentation with their forgiveness applications.

PPP Loan Maturity

Lastly, under the CARES Act and previous SBA guidance, PPP loans had a maximum maturity of ten years from their origination date and all PPP loans would mature and be payable after no more than two years from the date on which the borrower applies for loan forgiveness. Now, under the Flexibility Act, PPP loans made on or after June 5 will have a minimum maturity of five years, and a maximum maturity of ten years, from the date on which the borrower applies for forgiveness. Lenders and borrowers may mutually agree to modify the maturity terms of loans made before June 5 to apply the extended maturity provision.

These new provisions in the Flexibility Act will provide even further opportunities for small businesses to reap the benefits of the PPP Loan program. As always, small businesses are encouraged to reach out to Di Monte & Lizak, LLC for guidance on how to manage their operations during these challenging times.

Attention Chicago Businesses – The Chicago Fair Workweek Is Coming

By Karuna S. Brunk

Just as employers are starting to reopen the workplace, the Chicago Fair Workweek Ordinance hits Chicago businesses effective July 1, 2020.  Let’s review the Ordinance:

Covered Employers & Employees  Generally, employers with at least 100 employees “globally” (not those exclusively within the Chicago city limits) or 250 employees for nonprofit corporations are covered by the Ordinance as long as they employ at least 50 “covered employees.”  A “covered employee” earns $50,000 or less (salaried) or less than $26.00 per hour (hourly) and spends the majority of his work time in Chicago.  The Ordinance covers restaurants if they have at least 30 locations and 250 employees “globally.”  The following industries are covered by the Ordinance:

  • Building services (janitorial, security, maintenance)
  • Healthcare
  • Hotels
  • Manufacturing
  • Restaurants
  • Retail stores
  • Warehouse services (storage, loading, distribution, delivery)

What Is Required?  The Ordinance requires the following of employers:

  • Pre-employment: Employers must provide covered employees with a good faith estimate in writing of the projected days and hours of work.
  • Notice of Work Schedules: Employers must provide covered employees with at least 10 days advance notice of their work schedule (shifts and on call status). Schedules must be posted and transmitted electronically to employees upon request.
  • Right to Decline: If the employer makes changes to the schedule after the 10-day deadline by adding hours, the employee may refuse to work the previously unscheduled hours.
  • Predictability Pay: Employees receive one hour additional pay when an employer adds hours to a shift or a shift’s time, or date is changed with no change to the number of hours worked after the 10-day deadline has elapsed.
  • Pay for Cancelled Hours and Shifts: Covered employees must receive no less than 50% of their pay for any hours that are cancelled within less than 24 hours’ notice from the beginning of the shift during which the canceled hours were to take place.  If the employer cancels the entire shift, then the covered employees gets 50% of their pay for the entire shift.
  • Right to Rest: Employees have the right to decline shifts that begin less than 10 hours after the end of the previous day’s shift, and if a covered employee agrees to work such a shift, she is entitled to 1.25 times her regular base pay rate.

And what about COVID-19?  Well, the Chicago rules provide that the Ordinance will still go into effect on July 1.  However, the City did make exceptions to the employer requirements in cases in which COVID-19 causes the employer to change its operating hours, operating plans, or the goods or services provided by the employer which would result in schedule changes for employees.  Additionally, although the Ordinance does allow employees to file suit for violations, the City has delayed this private right of enforcement until January 1, 2021.  The City can still enforce the Ordinance and issue fines ranging from $300 to $500 per day, per employee.

Due to the complexity of this new ordinance and its application to particular industries and businesses, we suggest that employers contact a qualified attorney for guidance on changes to workplace policies and procedures.

The Health Care Provider Exemption from the FFCRA

By Karuna S. Brunk

We previously outlined the paid leave employee entitlements under the Families First Coronavirus Response Act (FFCRA).  Sections 3105 and 5102 of the FFCRA specifically exempt certain employees who are health care providers or emergency responders from its paid leave and expanded family and medical leave benefits.  The U.S. Department of Labor (DOL) recently published guidance in the form of a Temporary Rule concerning the definition of “health care provider” and “emergency responder.”  Both terms were largely undefined by the FFCRA, and we previously presumed that the DOL would rely on other legal guidance and definitions that limited the health care provider exemption to a select group of medical providers.

The Temporary Rule provides that employers may elect to exclude from eligibility for both paid sick leave and expanded family and medical leave a broad swath of employees, including “any individual who is capable of providing health care services necessary to combat the COVID-19 public health emergency.”  The Temporary Rule attempts to strike a balance between allowing workers to take leave when they are sick and not detracting from the health care work necessary to combat COVID-19.

The Temporary Rule also states that the “health care provider” exclusion applies not only to medical professionals but to other workers who are needed to keep hospitals and similar health care facilities “well supplied and operational.”  As such, workers who are involved in research, development, and production of equipment, drugs, vaccines, and other items needed to combat COVID-19 may be excluded from the FFCRA paid sick leave and expanded family and medical leave provisions.  According to the DOL, this exemption applies to all individuals employed in doctors’ offices, hospitals, health care centers, clinics, anyone providing health care instruction, medical schools, local health departments, nursing facilities, retirement facilities, any facility that performs medical or laboratory testing, pharmacies, and any similar institution.

“Emergency responder” also has a broad definition under the FFCRA and includes “individuals who interact with and aid individuals with physical or mental health issues, including those who are or may be suffering from COVID-19.”

Notably, the DOL has advised the following:

(1) The health care provider exemption under the FFCRA does not impact employees’ rights to take paid sick leave under other employer policies (accrued sick days, personal days, vacation, or other employer-provided leave).

(2) An employer is not required to exercise the health care provider exclusion – if an employer elects not to exclude employees from leave under the FFCRA, it is entitled to the same tax credits that it would receive if it allowed non-health care provider employees to take leave under the FFCRA.

(3) Employers should be “judicious” when exempting employees from paid leave under the FFCRA due to them being “health care providers” or “emergency responders” – presumably, this means to exercise flexibility, compassion, and empathy when responding to your frontline workers.

We suggest that employers act consistently when applying the FFCRA to their employees so as to avoid employment discrimination claims.  As always, this is an evolving and dynamic area of the law – consult with a qualified attorney as you respond to individual cases.

COBRA In the Time of COVID-19 and Beyond

Margherita M. AlbarelloBy:  Margherita M. Albarello

The COVID-19 pandemic has caused the U.S. Department of Labor (DOL) and the Internal Revenue Service (IRS) to issue a joint rule suspending employer and employee notice and election deadlines related to health care continuation under the Consolidated Omnibus Budget Reconciliation Act (COBRA) during the COVID-19 National Emergency “Outbreak Period.”  Relatedly, the DOL issued a new model COBRA continuation coverage notice on May 1, 2020 (https://www.dol.gov/sites/dolgov/files/EBSA/laws-and-regulations/laws/cobra/model-general-notice.docx). This article highlights these recent changes.

I. The Joint Rule extends the deadlines for the issuance of election notices and for employees to elect and pay for COBRA continuation coverage.

A. Pre-existing deadlines:

In general, COBRA allows an employee who is covered by a group health plan on the day before the occurrence of a qualifying event (e.g., employment termination, reduction in hours that causes loss of plan coverage) to elect COBRA continuation coverage upon the qualifying event. An employer subject to COBRA requirements (20 or more employees) must notify its group health plan administrator within 30 days after an employee’s qualifying event.  Within 14 days of the notification, the plan administrator must notify the employee of his COBRA rights.  If the employer also is the plan administrator and issues COBRA notices to employees directly, the employer has the entire 44-day period in which to issue a COBRA election notice to the employee.  Normally, the employee has 60 days from the date of receipt of the COBRA notice to elect COBRA coverage and another 45 days after the date of the COBRA election to make his initial COBRA premium payment.   COBRA coverage may be terminated due to the employee’s failure to pay premiums on time.  A premium payment is considered timely if it is paid within a 30-day grace period.

B. New deadlines:  The Joint Rule extends these pre-existing deadlines during the so-called “Outbreak Period.”  The “Outbreak Period” is defined as the period beginning on March 1, 2020 and ending 60 days after the announced end of the National Emergency.  For example, if the National Emergency end date is June 29, 2020, the Outbreak Period ends 60 days later, on August 29, 2020.

Example of COBRA election extension assuming Outbreak Period end date of June 29:  Jim works for and participates in ABC’s group health plan. On March 31, 2020, he loses health coverage due to a reduction in hours.  Although the Joint Rule allows ABC to disregard the 44-day deadline for issuing Jim his COBRA continuation election notice, ABC gives him a COBRA election notice on April 1, 2020.  What is Jim’s deadline for electing COBRA?

Answer:  Normally, Jim has until May 31, 2020, (60 days from April 1) to elect COBRA coverage.  However, Jim’s election deadline is extended from April 1, 2020, to the new COBRA election deadline, which is 60 days from August 29, 2020 (end of the Outbreak Period), making his election deadline October 28, 2020.  Jim has 45 days from his extended election date to make his first COBRA premium payment for all coverage retroactive to his original date of coverage loss.

The Joint Rule examples explain that coverage must remain active throughout the Outbreak Period despite the employee’s delay in electing COBRA coverage or delay in paying premiums until after the Outbreak Period ends.

Although the Joint Notice specifically states that an employer should disregard the Outbreak Period when it determines the date on which it provides the COBRA election notice, we suggest that employers issue election notices based on pre-existing timelines and not rely on extensions.  Under the Joint Rule, participants already have an extension to elect and pay for COBRA coverage.  Thus, employers and plan administrators may want to provide election notices as quickly as possible to limit the length of election and payment periods to the extent possible.

Employers and plan administrators also need to ensure that management and human resources staff know about and accordingly implement the new deadlines and rules. Plans and insurers are not required to pay claims during a period for which COBRA premiums have not been paid; however, they must advise providers that an individual is covered subject to payment of the premiums, and claims must be paid once the premiums have been paid. Most large employers have self-funded plans. They should be certain that claims processors and call handlers are aware of who is in the election period or payment grace period. Employers should also be sure that vendors do not pay claims until premiums are paid.

II. Employers should review their COBRA continuation coverage notice. 

On May 1, 2020, the DOL issued the first update to its model COBRA notices since 2014.  The continuation coverage model notice’s main change is that it answers questions about how Medicare eligibility affects COBRA rights.

Employer use of the model notice is not mandatory, but it is advisable.  If appropriately completed and timely delivered to a participant, the DOL considers the employer to be in good-faith compliance with COBRA’s notice content requirements.   This is important given the rash of class action litigation alleging that non-DOL notices are misleading and fail to provide a participant with enough information to make an informed decision on continued coverage. Although employers should generally follow the DOL model notice, they should also ensure that their notice is customized for their particular plans. The model notice is also available in Spanish and may be completed online.

Employers should contact their COBRA administrators to discuss the best practices in light of these developments.  Employers are liable for improper notices, even if they use a third-party administrator to issue the notices.  Employers should review their third-party contracts to ensure that they include the appropriate indemnification and defense provisions and sufficient insurance limits to cover them if their administrators fail to issue proper notices.

Reopening and EEOC Guidance for Employers

By Karuna S. Brunk

At least in the short-term, COVID-19 is here to stay.  As such, many employers are exploring what they can and cannot do and say to protect the workplace and limit liability.  On April 23, 2020, the Equal Employment Opportunity Commission (EEOC) issued new guidelines to aid employers in protecting the workplace and avoid running afoul of the Americans with Disabilities Act (ADA).

1. Screening and Medical Inquiries

Employers may ask employees about the COVID-19 symptoms that have been identified by the Centers for Disease Control and Prevention (CDC) – fever, chills, cough, shortness of breath, sore throat, chills, muscle pain, headache, or loss of taste or smell – to screen employees for illness before they enter the workplace.  Employers should check the CDC website (https://www.cdc.gov/coronavirus/2019-ncov/symptoms-testing/symptoms.html) for additional symptoms as public health officials learn more about the virus and its impact on the human body.

The EEOC has also said that employers can take employees’ body temperatures.  This is generally a “medical examination” under the ADA, but because of the community spread of COVID-19, the EEOC has acknowledged that this data point is useful for protecting the workplace.  Obviously, employers should be aware that many individuals who have COVID-19 do not have fevers.

The EEOC has stated that employers may also administer COVID-19 test a before permitting employees to enter the workplace to prevent the spread of COVID-19 in the workplace.  Presumably, this EEOC guidance refers to testing employees to determine if they actually have the virus and not to determine if they have previously had the virus.  As testing for COVID-19 becomes more wide-spread through the phased reopening, it may become easier for employers to obtain tests employees as a matter of course.  Employers may also require an employee to provide a doctor’s note regarding his “fitness” to come to work.  For example, if an employee went home with a cough and fever, his employer may require him to provide a doctor’s note to certify that he does not have COVID-19 and is fit to return to work.

2. Employee Leave

Employers may send employees home or require employees to stay home if they have COVID-19 symptoms.  As a reminder, the Families First Coronavirus Response Act may come into play in these circumstances.

3. Confidentiality Concerns 

Generally, the ADA requires that employers limit accessibility to, and confidentially retain employee medical information.  COVID-19 information should be protected in a similar manner as other types of employee medical information – employers should not store this information in employee personnel files, for example.

4. The Onboarding Process 

Similar to the employee screening process described above, after employers extend offers of employment, they may screen job applicants for COVID-19, including asking whether the applicant has COVID-19 and taking the applicant’s temperature.  Employers may even delay employee start dates or withdraw offers altogether if applicants have COVID-19 or symptoms of COVID-19 and cannot safely enter the workplace.  Employers should proceed with caution in withdrawing a job offer or postponing a start date and consult with an attorney to avoid other types of potential liability.

5. Reasonable Accommodations 

Some employees may be entitled to a reasonable accommodation under the ADA due to having a disability that is unrelated to COVID-19 but may cause them to be at high risk for complications from COVID-19.  To be clear – generally, COVID-19 by itself would not be considered a disability pursuant to the guidance under the ADA.  To accommodate such employees, employers may consider physically altering the work environment, restructuring job duties, or temporarily transferring an employee to a different position.   Ultimately, if possible, it may be optimal to consider teleworking as a way to accommodate employees and foster safe social distancing in the workplace.  Generally, employers should engage in the same interactive process as they would utilize in response to accommodation requests outside of the COVID-19 situation – employers may request medical documentation and ask questions necessary to accommodate the employee.  Employers may need to provide temporary accommodation to employees due to the COVID-19 situation.  As with other ADA reasonable accommodation requests, an employer does not need to provide a particular reasonable accommodation if it poses an “undue hardship” to the business.

This is the “tip of the iceberg” of EEOC guidelines, and, because the COVID-19 situation is dynamic and evolving, the EEOC likely will release additional guidelines.  As you open your business and put measures in place to protect employees from COVID-19, we suggest that you contact a qualified and experienced labor and employment attorney for advice and guidance during this uncertain time.

Shuttered Businesses May Be Entitled to Relief From Insurers

By Derek D. Samz

Due to the ongoing Covid-19 pandemic, many businesses have had to cease all, or a large majority, of their operations. As a result of this business interruption, these businesses are experiencing unprecedented losses in revenue.  What these companies may not be aware of that they may be entitled to payment from their insurance companies under their businessowner or commercial property owner insurance policies.  Under these policies, insured companies may be entitled to receive payments equal to the actual lost business income incurred during the shutdown due to the necessary suspension of the insured companies’ operations due either to the pandemic itself or the shutdown order issued by Governor Pritzker.

Insurers have been proactively and aggressively attempting to dissuade their customers from submitting claims related to the loss of business income.  This widely disseminated information May 1) not be applicable to your business’ policy; or2) may not in fact be accurate.  Numerous lawsuits have been initiated seeking a determination that insurance policies do in fact entitle companies that have been shut down to receive business interruption payments.

This area of the law is developing rapidly and your business may be entitled to receive business interruption payments.  If you would like to have your policy reviewed by an attorney, please contact us as soon as possible.

Going into a Costly Nursing Home for Long term Care? Pick the Correct Medicaid Asset Protection Planning Strategy.

By Anthony B. Ferraro

What is crisis planning for Medicaid eligibility in long-term care cases?

Crisis planning means that one is engaged in planning that will stop, as soon as legally and ethically possible, the payment of the monthly nursing home private pay fee. We call it crisis planning because the obligation of paying anywhere from $6000 to $14,000 per month in Illinois is usually a crisis for most middle-class taxpayers. Therefore, the goal of crisis planning is to stop this devastating financial cash outflow as soon as possible.

So how do you stop these very high private pay monthly nursing home costs?

First, you must remember that Medicare will be of no help. Medicare was never designed to be a subsidy to taxpayers for custodial care. Medicare only subsidizes taxpayers for acute care and some of the skilled rehab that follows acute care, usually resulting from hospitalization.

So, if Medicare doesn’t cover the cost, what does?

If you don’t have long-term care insurance, don’t feel bad, only 6% of the population is estimated to have long-term care insurance. Therefore, you either have to continue to pay privately or participate in the Medicaid program. One exception to this is that certain veterans have access to veteran long-term care facilities based on their history of service. But for most people that do not have a history of service in the military, Medicaid is the only government program that will provide relief for the devastating financial cost of long-term care.

How does Medicaid provide relief in long-term care crisis situations?

First, you must become eligible for Medicaid on both a health-based standing and financial-based standing. If someone has been assessed, and it is determined they need long-term care in a nursing facility or supportive living in a supportive living facility, Medicaid may step in to pay. However, there is one more hurdle that must be met before Medicaid will step in, and that is becoming financially eligible as the Medicaid applicant. To qualify for Medicaid – LTC (long-term care), an individual must be spent down to $2000 of assets.

Further, the Medicaid applicant once approved, is allowed to keep $30 a month of income. In the case of married couples, where only one spouse needs Medicaid for long-term care, the healthy spouse is entitled to keep the home plus $109,560. In such a case, the healthy spouse is allowed to keep their income and get a diversion of the ill spouse’s income if they don’t have enough monthly income to meet the $2,729 threshold. Thus, planning is required to meet these very low thresholds and still preserve assets so that quality-of-life can be maintained during many years of custodial care.

How do we protect assets in Medicaid long-term care crisis cases?

Again, the strategies will depend on whether the applicant is married or single.

How do you handle married cases?

In married cases, some of the strategies that you can consider are relying on are interspousal transfers, transfers to children or other persons with disabilities, and adopting the position of refusal of the healthy spouse to contribute to the cost of care of the ill spouse (based on very technical Medicaid regulations), conversion of excess assets to spousal annuities, redeployment of assets into non-countable resources such as the principal residence, an automobile, and prepaid burial arrangements. Finally, divorce is something that may be considered, but divorces have to meet specific equitable standards-based on Medicaid’s interpretation of the divorce laws.

♦ How do you handle cases where Medicaid applicants are single individuals?

In single cases, the goal is to redeploy excess countable assets into non-countable resources such as prepaid burial arrangements, and transfers to qualifying individuals such as disabled children. After that, the goal is to reduce an individual’s assets down to the $2000 asset limit through a redeployment of assets through either gifting to an asset protection trust or transferring assets to a self-settled “Medicaid payback trust” authorized under the Medicaid laws often referred to as OBRA. However, in many cases, the above transfers will result in penalty periods; therefore, enough money has to be reserved in the form of the income stream to pay through the penalty periods created by the transfers described above. The only way an income stream can be created that will not itself be considered a countable asset is to convert the reserve funds into an income stream under what is either a Medicaid compliant annuity or Medicaid compliant promissory note.

♦ Are there any other methods of handling assets to preserve funds in a crisis case?

Yes, there is. If there are enough assets available to carry either the single individual through the cost of long-term care for a five-year period or in the case of a married couple there are enough funds to carry both spouses through the cost of long-term care for a five-year period, then any assets in excess of the assets necessary to carry for the five year period can be gifted away. At the end of five years, the gifted assets will be beyond the five-year lookback imposed by Medicaid, and the transferors of the gifted money will now be eligible for Medicaid because their prior transfers are beyond the five-year look back.

♦ When do the strategies have to be employed?

If Medicaid asset protection strategies are going to be employed, we recommend that you consult with qualified legal counsel that has a thorough understanding of the Medicaid laws before embarking on anything described above. Once you have obtained the proper counsel, the above strategies must be employed before the Medicaid application is filed. Most strategies will not work after the Medicaid application is filed.

I hope this takes some of the mystery out of Medicaid asset protection planning for a long-term care cost crisis. I’ve described some of the asset protection strategies that we employ in our office. There are many other strategies that are too numerous to mention. Hopefully, this will explain, in a general way, how you can obtain some relief when in a long-term care crisis.

Illinois Court Status Updates

By Edyta Kania

Circuit Court of Cook County: All matters in all Districts and Divisions are rescheduled and continued for a period of 30 days from the currently scheduled court date or a date not more than 30 days after May 31, 2020, whichever is later. Judges will be available in person in each division and district to hear emergency matters, as determined by the Presiding Judge of the respective division or district. Electronic filings of motion and new cases continue as usual.

The Sheriff of Cook County will resume enforcement of eviction orders relating to residential real estate on June 1, 2020; the time period in which such orders expiring before June 1, 2020, must be enforced pursuant to 73 5 ILCS 5/9-11 7 is extended 60 days from the current expiration date, but not later than July 17, 2020.

Chancery Division. All mortgage foreclosures, evictions, orders for possession, and judicial sales are stayed until May 31, 2020. There shall be a moratorium on final judgments and executions of judgments in mortgage foreclosure proceedings.

Law Division (All Sections). Cases set for trial between March 17, 2020 through August 14, 2020 shall be reset. All motions not set by order are stricken and need to be re-scheduled and re-noticed. All case management and status dates set by order between March 17, 2020 and May 15, 2020 shall be reset to a date between June 29, 2020 and August 14, 2020. Beginning April 15, 2020 all emergency motions will be heard remotely by telephone or video.

U.S. District Court (NDIL): Civil case hearings, bench trials, and settlement conferences scheduled for on or before May 29, 2020 are stricken, to be re-set by the presiding judge to a date on or after June 1, 2020. Civil jury trials scheduled for on or before June 26, 2020 are stricken, to be re-set by the presiding judge to a date on or after June 29, 2020. The Dirksen Courthouse and the Roszkowski Courthouse are closed to public entry through May 29, 2020. The Court remains accessible via electronic filing, and, in some emergency situations via phone and video conferencing.

U.S. Bankruptcy Court (NDIL): Effective 03/23/2020: (1) All hearings will be conducted by telephone and there will be no personal appearances in court; (2) Court call days and times have changed; (3) All motions must be served a minimum of 7 days before presentment; a (4) A party who does not want a motion called will have to file a Notice of Objection 2 business days before the presentment date.  Otherwise, the motion may be granted in advance. The bankruptcy court’s public service counters at the courthouses in Chicago and Rockford will be closed until further notice.

Circuit Court of Lake County: All matters are continued to a date after May 29, 2020.

Circuit Court of DuPage County: Cases will be continued for a period between 30-60 days from the originally scheduled court date.

Circuit Court of Kane County: All matters are rescheduled and continued through June 1, 2020.

Court Updates

By Edyta Kania

Circuit Court / Cook County: All matters are rescheduled and continued for 30 days from the originally scheduled court date (except for emergencies). Electronic filings of motion and new cases continue.

♦ No later than April 16, 2020, all hearings shall be conducted by videoconferencing, so that the only persons physically in the courtroom are those persons essential to activities that require that person to be in the courtroom; at the discretion of the judge presiding, if it is not reasonably possible to conduct a hearing or by videoconference, it may be conducted by teleconference.

♦ The Sheriff of Cook County shall cease enforcement of eviction orders relating to residential real estate and shall resume enforcement of said orders on May 18, 2020; the time period in which such orders expiring before May 18, 2020, must be enforced pursuant to 73 5 ILCS 5/9-117 is extended 60 days from the current expiration date, but not later than June 15, 2020.

Chancery Division. All mortgage foreclosures, evictions, orders for possession, and judicial sales are stayed until May 18, 2020. There shall be a moratorium on final judgments and executions of judgments in mortgage foreclosure proceedings.

♦ All mortgage foreclosures, evictions, orders for possession, and judicial sales are stayed for 30 days from 03/16/2020. Some judges are available to handle emergency matters in person, via phone or video conferencing. The Sheriff will cease execution of eviction orders on residential real estate and resume them in 30 days.

Law Division (Assignment, Commercial Calendar, Tax Section and Individual General Calendar). All deadlines will be extended to the future 30-day date. Cases set for trial that have been reset by this order remain set for trial on the day to which they have been rescheduled. All motions not set by order are stricken and need to be re-scheduled and re-noticed.

Law Division (Motion Section). All cases and deadlines will be automatically extended by approximately 8-weeks.

Probate Division. All matters are continued and reset to a date after May 18, 2020. Emergency matters include, but are not limited to, a petition to appoint or extend a temporary guardian, a petition to open a decedent’s estate to approve the sale of real estate, and a petition to authorize a distribution of settlement proceeds where a recipient has a financial hardship. General Administrative Order 2020-01 dated April 9, 2020 provides instructions for emergency motion procedures (e-filing and courtesy copies, in-person appearances, video-conferencing).

U.S. District Court (NDIL): Between 03/17/2020 and 04/03/2020, all deadlines in civil cases are extended by 21 days. The Court remains accessible via electronic filing, and, in some emergency situations via phone and video conferencing.

U.S. Bankruptcy Court (NDIL):  Effective 03/23/2020: (1) All hearings will be conducted by telephone and there will be no personal appearances in court; (2) Court call days and times have changed; (3) All motions must be served a minimum of 7 days before presentment; a (4) A party who does not want a motion called will have to file a Notice of Objection 2 business days before the presentment date.  Otherwise, the motion may be granted in advance.

Circuit Court of Lake County: Effective 03/17/2020 through 04/03/2020, all deadlines in civil cases are extended by 21 days. The Lake County Sheriff’s Judicial Sales Department will be closed for 30 days and all business will be suspended during that time. All sales will be continued up to 59 days from the scheduled sale date.

Circuit Court of DuPage County: Effective 03/17/2020 through April 17, 2020, all civil and criminal cases are rescheduled. Cases will be continued for a period between 30-60 days from the originally scheduled court date. The Circuit Court Clerk will notify all interested parties via mail of a future court date.

Circuit Court of Kane County: All matters set for trial are continued for a period of 60 days (from March 20, 2020). All trials set on Tuesday, May 19, 2020 and every date thereafter remain set for trial.

SBA Offers Low Interest Loans to Illinois Small Businesses Impacted by Coronavirus

By Robert E. Harig

The U.S. Small Business Administration (SBA) is now offering low-interest federal disaster loans for working capital purposes to Illinois small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19) pandemic. SBA acted under authority provided by the Coronavirus Preparedness and Response Supplemental Appropriations Act signed by President Trump in March, 2020.  Such SBA assistance is available to small businesses located in the state of Illinois or in several specified counties in surrounding states. Here are some details:

 Loan Assistance Available: The loans are referred to as Economic Injury Disaster Loans (EIDLs).  They are working capital loans to help small businesses (as well as most private, non-profit organizations) meet ordinary and necessary financial obligations that cannot be met as a direct result of the Coronavirus pandemic disaster. EIDLs cannot be used to refinance long term debts. The deadline to file EIDL applications is December 21, 2020.

 Credit Requirements: Applicants must have a credit history acceptable to SBA and must show ability to repay the loan.

 Loan Amount Limit:  The law limits EIDLs to a maximum of $2 million. The actual amount of each loan is based on the economic injury determined by SBA. In determining the amount of the loan, SBA considers available business interruption insurance and potential contributions that are available from the owners of the business. SBA has the authority to waive the $2 million limit for borrowers deemed to be a major source of employment.

 Interest Rate:  The interest rate is determined by SBA based on a specified formula, and it is fixed for the life of the loan. The maximum interest rate is 3.750%.

 Loan Term and Repayment:  SBA will determine an appropriate loan term and installment payment amount based on the financial condition of the applicant. The maximum loan term is 30 years.

 Collateral: Collateral is required for all EIDL loans over $25,000. Real estate when available is acceptable. Although SBA will generally not decline a loan for lack of collateral, it will require the borrower to pledge available collateral.

 Insurance Requirements: SBA may require an applicant to obtain and maintain appropriate insurance.

 Loan Eligibility Restrictions:  Applicants who have not complied with the terms of previous SBA loans may not be eligible. This includes borrowers who did not maintain required flood and/or hazard insurance on any previous SBA loan.

Further information: Applicants may apply online, receive additional disaster assistance information and download applications at https://disasterloan.sba.gov/ela. Applicants may also call SBA’s Customer Service Center at (800) 659-2955 or email disastercustomerservice@sba.gov for more information on SBA disaster assistance. Di Monte & Lizak is here to help you with all your small business legal needs during these unprecedented times. Please feel free to contact us with your questions and concerns.

Elder Care and Elder Law Updates Regarding COVID-19

By Anthony B. Ferraro

On March 13, 2020, President Trump issued a national emergency declaration due to the COVID-19 pandemic. Technically speaking this declaration resulted in the issuance of what is called a 1135 Waiver, which allows Centers for Medicare and Medicaid Services (CMS) to waive many rules and regulations, including conditions of participation for hospitals and long-term care facilities as well as other medical providers. Below is an overview of some other updates:

♦ The Social Security Administration is closing its field offices. But payments to beneficiaries should not be affected.

♦ CMS sent recommendations to hospitals and other medical providers that all elective surgeries, nonessential medical, surgical and dental procedures be delayed due to the outbreak.

♦ CMS is temporarily loosening restrictions for (i) Medicare beneficiaries to use telehealth services for common office visits, mental health counseling, and preventive health screenings and (ii) HIPAA violations in connection with telehealth measures (by waiving penalties for such violations if the providers act in good faith through everyday communication technologies).

♦ CMS is waiving the requirement for a 3 day prior hospitalization for coverage of Skilled Nursing Facility (SNF) stays. For beneficiaries who exhausted their SNF benefits, it authorizes renewed coverage without starting a new benefit period.

♦ CMS is suspending nonemergency health inspections across the country.

♦ CMS is restricting all visitation, except in end-of-life and other compassionate care situations (including family caregivers who are not essential caregivers, except in end-of-life situations).

♦ Home health agencies are expected to provide ongoing care, even when therapeutic interventions are required.

♦ CMS is temporarily waiving requirements that an out-of-state provider be licensed in the state where they are providing services when they are licensed in another state.

Cautionary Notes Upon Entering Long-Term Care During Coronavirus

One important result of the 1135 Waiver is that the 3-day inpatient stay requirement has been temporarily waived. This means that patients covered by traditional Medicare no longer need the 3-day inpatient stay to access Medicare Part A SNF benefits, as long as the patient has skilled care needs. This applies to patients with any sort of medical condition and not just those affected by COVID-19.

Some believe that CMS’s rationale for this is to free up acute hospital beds for an anticipated increase in the number of COVID-19 patients that may require hospitalization. One important factor is that patient rights have not been waived, thus patients need to consent to their transfer and of course the skilled nursing facility must be able to meet their medical needs.

 Cautionary Notes:

 ♦ Notwithstanding this welcomed flow of transfers from hospitals to skilled nursing facilities, we urge all of our clients to be sure that prior to entering any long-term care facility, whether it be a skilled nursing facility, assisted living facility, supportive living facility etc., that the contract for admission to the facility should be reviewed by your attorneys.

♦ Once the potential 100 days of Medicare Part A coverage for a skilled nursing facility has passed, and the patient is not able to return home, patients will either have to pay out-of-pocket or look to gain eligibility in the Medicaid Long-Term Care program once Medicare has run out. Again, we think it is essential that clients consult with counsel before they seek eligibility or file an application for Medicaid in any long-term care facility.

Remote Notarizations and Witnessing of Documents

In response to the COVID–19 pandemic, Gov. Pritzker declared all counties in the state of Illinois as a disaster area on March 9, 2020 (Gubernatorial Disaster Proclamation “Proclamation”) and on March 26, 2020 issued Executive Order No. 12, pursuant to his authorization under the Illinois Emergency Management Agency Act providing:

1. For the period during the duration of the Proclamation related to the COVID-19 outbreak, the requirement that a person must “appear before” a Notary Public is satisfied if the Notary Public performs a remote notarization via two-way A/V communication technology, provided that the Notary Public commissioned in Illinois is physically within the state while performing the notarial act and the transaction follows the guidance posted by the Illinois Secretary of State on its website. Note, there are ten requirements for remote notarization in that guidance.

2. During the duration of the Proclamation, any act of witnessing required by Illinois law may be completed remotely via two-way A/V communication provided that:

a. The two-way A/V communication technology (“AV’) allows for direct, contemporaneous interaction between the individual signing the document (“signatory”) and the witness by sight and sound;

b. the AV must be recorded and preserved by the signatory or the signatory’s designee for a period of at least three years;

c. the signatory must attest to being physically located in Illinois during the AV communication;

 d. the witness must attest to being physically located in Illinois during the AV communication;

 e. the signatory must affirmatively state on the AV communication what document the signatory is signing;

 f. each page of the document being witnessed must be shown to the witness on the AV and initialed by the signatory in the presence of the witnesses;

 g. the act of signing must be captured sufficiently up close on the A/V communication for the witness to observe;

 h. the signatory must transmit by fax or electronic means a legible copy of the entire signed document directly to the witness no later than the day after the document is signed;

 i. the witness must sign the transmitted copy of the document as a witness and transmit the signed copy of the document back via fax or electronic means to the signatory within 24 hours of receipt; and

j. if necessary, the witness may sign the original signed document as of the date of the original execution by the signatory provided that the witness receives the original signed document together with the electronically witnessed copy within 30 days from the date of the remote witnessing.

3. All provisions of the Electronic Commerce Security Act of the State of Illinois remain in full effect.

4. During the duration of the Proclamation, absent an express prohibition in a document against signing in counterparts, all legal documents, including deeds, last wills and testaments, trusts, durable powers of attorney for property, and durable powers of attorney for healthcare may be signed in counterparts by the witness(es) and the signatory.

Cash Strapped? Prioritize Creditors

By Julia J. Smolka

At this unprecedented time, many of you are experiencing significant work and income stoppages.  As an attorney with extensive experience in debtor and creditor work, there are some dos and don’ts.

♦ Prioritize payments to creditors. Reach out to your landlord and ask for an extension on rent. If you have a mortgage, immediately go online to your lender’s loss mitigation options. They will likely have a new program for forbearance-type payment plans or options. The forbearance can be a 3 to 6 month-long break, with possible payment of interest only.  Be proactive and ask.

♦ Pay any car loan or lease, as your car can be repossessed without any warning or notice for non-payment.

♦  Reach out to utility companies and ask for a hardship extension on payments.

♦ Lost your job? Immediately apply for unemployment benefits online. Student loan payments should also be deferred or placed on forbearance if possible.

♦ Owe the IRS? Call the taxpayer advocate center and immediately submit hardship documents showing that payments to the IRS will make it impossible for you to maintain a minimum standard of living. Same with state tax debt.  Or apply for a payment plan on back taxes.

♦ Do NOT pay any medical bills in full. Immediately request a payment plan. Most medical creditors accept long term payment plans with no interest.

♦ Credit cards come last. They should not be a priority unless your basic living expenses are met. Ask for payment deferments but expect all lines of credit to be shut down quickly.  If a credit card is on autopay, stop it. If you have a credit card with your primary bank, the creditor likely has the ability to take funds from your account whether you give explicit instructions or not.

♦ Do NOT cash out retirement accounts.  These funds are protected from all of your creditors, even the IRS.  Keep that money there as long as you can.  Do NOT cash out a whole life insurance policy? Check your cash surrender value.  If you have a spouse or a minor or disabled child the cash value is likely exempt from creditors.

Available Solutions to Your Business In Uncertain Times

By Abraham E. Brustein and Derek D. Samz

In this time of economic uncertainty, your business may face an increasing number of late customer payments, supply chain issues or increased debt pressure. Your small business is going to continue to incur fixed overhead costs while being unable to generate current revenue.

We can help you plan now for what to do when the lock down ends. We all know that as people are permitted to resume business and commercial activity, it will take time to generate sales and collect the funds needed to operate your business profitably and repay the accruing debt that may have gone delinquent or not serviced  for several months. DiMonte & Lizak’s insolvency team recognizes you may be facing a number of issues and may be unaware of the myriad solutions available to you, a number of which have recently been expanded or modified.  In addition to assisting your business with collection, we can also assist you with gaining the time needed to repay your, or your businesses’ debts.

You may know that on February 19, 2020, a new form of Chapter 11 (called SBRA) targeted to small businesses and their owners went into effect.  Congress enacted this law for the express purpose of making the reorganization process efficient and affordable enough to enable small businesses to obtain the benefits of Chapter 11. While a good start, SBRAs were “supercharged” on March 27, 2020 when the CARES Act was enacted. For a period of one year, the debt limit for an SBRA filing was increased from $2,725,625 to $7,500,000. Your moderate to small business may now have access to the Chapter 11 at an affordable price.

Further, SBRAs avoid many costly procedural hurdles to streamline a quick and effective reorganization. A repayment plan must be filed within 90 days of the petition. Creditor consent to the plan or reorganization is no longer required. One of the most attractive features of SBRA is the elimination of the “absolute priority rule” which requires a debtor to pay unsecured creditors in full or contribute meaningful new equity capital to contribute as a condition to retaining business ownership.

If you believe that your financial situation is beyond repair, or you have questions regarding debt issues generally, contact DiMonte & Lizak’s insolvency team.  Abraham Brustein, Julia Smolka and Derek Samz all have decades of experience navigating the issues that may be affecting your business.

 

Taxation Issues Related to COVID-19 Crisis

By Patrick D. Owens and Rebecca M. Cerny

On March 27, 2020, President Donald Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a $2 trillion economic stimulus, emergency assistance, and health care response for individuals, families and businesses affected by the 2020 coronavirus pandemic. The major highlights involve (i) direct payments to American taxpayers, (ii) small business relief, (iii) unemployment assistance, (iv) payroll tax provisions, and (v) use of retirement funds. The Congress is holding talks about expanding CARES Act by adding additional stimulus packages. The fuller scope and impact of CARES Act will be discussed at a later time when the Congress finalizes such plans.

On March 18, 2020, the Department of the Treasury and the Internal Revenue Service issued Notice 2020-17 providing relief under section 7508A(a) of the Internal Revenue Code (the Code) which postponed the due date for certain Federal income tax payments from April 15, 2020 to July 15, 2020. All taxpayers will have this additional time to file and make payments without interest or penalties. Illinois also approved a similar extension for state income taxes.

On March 18, 2020, President Trump also signed into law H.R. 6201, or the Families First Coronavirus Response Act (FFCRA Act). It took effect on April 1, it is not retroactive, and it expires on December 31, 2020. FFCRA Act provides for employer tax credits to offset the costs associated with the paid sick leave and expanded family and medical leave component and family and medical leave components of the Act. A discussion of the Act’s employment issues is found further within this issue.

♦ Payroll Tax Credit: Most employers will receive a refundable tax credit equal to 100% of qualified sick leave wages and qualified family and medical leave wages paid by the employer for each calendar quarter through the end of 2020. The tax credit is allowed against some taxes under the Code.

♦ Credit Amounts: When an employee (i) is experiencing symptoms associated with COVID-19 and is seeking a medical diagnosis, or (ii) currently is or goes into isolation in accordance with the law or with direction from a health care provider, the amount of qualified sick leave wages taken into account for each employee is capped at $511 per day. When an employee is not experiencing symptoms but uses the sick leave (i) to care for an individual who has been ordered to self-quarantine or is experiencing symptoms and is seeking a medical diagnosis, or (ii) to provide care for a child whose school or daycare has closed, the amount of qualified sick leave wages taken into account cannot exceed $200 per employee per day. The number of days accounted for qualified sick leave shall not exceed the excess of 10 over the aggregate number of days taken into account for all proceeding calendar quarters.

♦ Credits for the Self-Employed: Eligible self-employed individuals who are unable to work can receive a credit equal to the lower of (i) 67% of their average daily self-employment income, or (ii) the credit amounts allowed for employees discussed above.

♦ Credit for Health Plan Expenses: The amount of paid sick leave and paid family leave credits may also be increased to include certain amounts employers pay for the employee’s health plan coverage while they are on leave.

♦ Excess Credit: The amount of the paid sick leave credit allowed for any calendar quarter cannot exceed the total employer payroll tax obligation on all wages for all employees.  If the amount of the credit that would otherwise be allowed is so limited, the amount of the limitation is refundable to the employer.

♦ Other Limitations: Employers may not receive the tax credit if they also receive a credit for paid family and medical leave under the 2017 Tax Cuts and Jobs Act.  Employers instead would have to include the credit in their gross income.

COVID-19 – What Illinois Employers Need to Know

By Karuna S. Brunk

We previously reported on how employees can handle employment loss due to COVID-19 and the current health crisis.  This article focuses on what Illinois employers need to know.

1. Executive Order in Response to COVID-19: Effective March 21, 2020, Illinois Governor J.B. Pritzker issued an Executive Order in Response to COVID-19 directing all individuals to stay at home or at their residences, ordering all non-essential businesses and operations to cease, and prohibiting the gathering of more than ten people.  Certain “essential” businesses are exempt from the order and are allowed to remain open – healthcare and public health operations, human services operations, essential governmental functions, and businesses in essential infrastructure.  The order currently extends through April 30, 2020.

2. Families First Coronavirus Response Act: Effective April 2, 2020, and sunsetting on December 31, 2020, the federal government requires the following of businesses:

A. Paid Sick Leave: All private sector employers with fewer than 500 employees must pay 2 weeks of paid sick leave (up to 80 hours for full-time employees or the average hours in a 2-week period for part-time employees) to employees (exempt and non-exempt) who are unable to work on site or remotely for certain reasons:

1. Eligibility:

i. If the employee is subject to a government quarantine or isolation order related to COVID-19;

ii. If the employee has been advised by a health provider to self-quarantine due to COVID-19;

iii. If the employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;

iv. If the employee is caring for another person who is subject to a quarantine order or needs to self-quarantine;

v. If the employee is caring for children who are subject to school closures; or

vi. A “catch all” allowing the Department of Health and Human Services to consult with other federal agencies to develop additional conditions for paid sick leave.

2. Pay Caps: If an employee is sick himself, the amount of paid sick leave is paid at his regular hourly rate but capped at $511 per day and $5,110 in total.  If the employee is taking care of a sick family member or a child who is unable to attend school, then he is to be paid 2/3rds of his regular hourly rate of pay but capped at $200 per day and $2,000 in total.

B. Expansion of FMLA Leave: The new Families First Coronavirus Response Act broadens the protections under the Family and Medical Leave Act.  All private sector employers with fewer than 500 employees and all government employers must provide any employee who has been employed for 30 calendar days or more up to 12 weeks of paid Family and Medical Leave in order to care for a child (under 18 years of age) when schools are closed or daycare is unavailable due to the COVID-19 emergency and because the employee is unable to work or telework.

1. Pay:  Theoretically, the first 10 days of FMLA leave may be unpaid, but under the circumstances described above, this period might be covered by the paid sick leave component of the federal law.  After 10 days, employees are entitled to 2/3rds their regular rate of pay and capped at $200 per day and $10,000 in the aggregate.

C. Exemptions: There may be limited exemptions for “small” employers (employers with fewer than 50 employees) based on demonstrating for the U.S. Department of Labor that providing paid sick leave will jeopardize the viability of the business. There is also a limited exemption for healthcare workers and emergency responders.

D. Other Paid Leave: Employers may not require employees to use “other paid leave” prior to using the paid sick.

What to do now?

This is a dynamic situation.  Federal, state, and local governments responses vary by the hour.  We recommend that employers do the following:

  • Encourage remote work: Now is a very good time to encourage your employees, even your hourly employees, to work remotely.  The paid sick leave and FMLA components of the Families First Coronavirus Response Act apply when employees are unable to work.  As such, consider developing good supervision and management techniques that foster productive teleworking.  Be careful of “on-call” issues.
  • Temporary Paid Leave Policy: Consult with a qualified labor and employment attorney as you implement a paid leave program and allow your employees to take time away from work to deal with COVID-19 issues.  The Families First Coronavirus Response Act is ambiguous and convoluted and may require a significant amount of interpretation and analysis.
  • Notice: Look for a model notice from the US Department of Labor regarding the Families First Coronavirus Response Act.
  • Do not forget about the other employment law issues: COVID-19 is currently the most urgent issue for employers, as it should be.  But discrimination and wage and hour laws continue to apply, and, rest assured, plaintiffs’ attorneys will not hesitate to take legal action against employers if they see violations in these regards.

We are carefully monitoring the COVID-19 situation and the legal issues surrounding it and will regularly report on changes to the law, including the rules and regulations that will be promulgated by the federal government shortly.

The WARN Acts: Large Employer Obligations Related to COVID-19

By Karuna S. Brunk

Separate from the requirements of the FFCRA, COVID-19 has created an economic and financial crisis for employers.  The DOL has indicated that employers may layoff and furlough employees related to economic conditions without violating the FFCRA.  Larger employers may be required to provide notice to employees in the event that they want to conduct a mass layoff or need to close a business site.  Generally, the purpose of the notice requirement is to give employees time to adjust to the prospect of lost employment.

1. Federal WARN Act

The federal Worker Adjustment and Retraining Notification Act (“WARN”) applies to employers that have either (a) 100 or more full-time employees or (b) 100 or more employees, including part-time employees who, in aggregate, work at least 4,000 hours per week.

WARN requires employers to give a 60-day advanced notice to employees of plant closings and mass layoffs.  Plant closing means the permanent or temporary shutdown of a single site of employment or of one or more facilities or operating units within a single site of employment if the shutdown results in 50 or more employees losing their employment in at least a 30-day period.

WARN is also triggered if an employer lays off 500 or more workers at a single site of employment during a 30-day period or lays off 50-499 workers and these layoffs constitute 33% of the employer’s total active workforce (not counting part-time employees).  “Employment loss” does not include a termination for cause (poor performance or bad conduct, for example) and must exceed 6 consecutive months.  Alternatively, WARN may be implicated in the case of a reduction in hours of more than 50% during each month of any 6-month period.

If employees are not notified in accordance with WARN, employers may have to pay backpay, benefits, and civil penalties for each affected employee for each day of the defective notice.

2. Illinois WARN Act

The Illinois WARN Act applies to employers with (1) 75 or more full-time employees, excluding part-time employees, or (2) 75 or more employees, including part-time employees who, in aggregate, work at least 4,000 hours per week.

Similar to the federal WARN Act, the Illinois WARN Act requires the employer to provide 60-day advanced notice of pending business site closings or mass layoffs. A plant closing is a permanent or temporary shutdown of a single site of employment if the shutdown results in an employment loss at the single site of employment during any 30-day period of 50 or more employees, excluding part-time employees.     The Illinois act  defines a “mass layoff” as a reduction in force that results in employment losses for at least a 6-month period of at least 25 or more full-time employees and 33% or more of the workforce or 250 or more full-time employees.

Given these federal and state requirements, large employers have the following options to deal with the economic downturn due to the COVID-19 crisis:

  • Give Notice: Proactively give a WARN notice to employees that the company may have to implement a plant closure or a mass layoff due to the economic downturn and altered business conditions. This will meet the employer’s federal and state WARN requirements and protect the company from potential liability.  Employers should consult with a qualified labor and employment attorney to prepare and send this notice.
  • Rely on Internal Policies: For example, encourage employees to take voluntary vacations, offer reductions in pay, cut hours for non-exempt employees, voluntarily furlough workers to take care of family members, and practice social distancing. Work with an attorney to implement such policies and communicate effectively with employees.  Any internal policy decisions to avoid a mass layoff or plant closure should be cross-referenced with employer requirements under the FFCRA.
  • Government-Mandated Closures: Layoffs as a result of government action would not trigger WARN because they would not be considered initiated by the employer.
  • Recall Employees: If an employer intends to recall employees before the 6-month employment loss period elapses or subsequent to the COVID-19 crisis, the employer could avoid the requirements of WARN. However, tread carefully with this option – this period of economic uncertainty may extend far beyond what you anticipated.
  • Applicable Exceptions: The Federal WARN Act does not require the 60-day notice for employment losses that are a result of a “natural disaster.”  Illinois also provides an exemption to the notice requirements in the case of a “physical calamity.”  In these instances, employers should provide as much notice of a layoff as practical in advance of the natural disaster or after the fact.  Although COVID-19 will likely qualify under this exception, an employer may open itself to litigation if an employee argues that the layoff was not a direct result of the pandemic but a result of an economic downturn.

The Federal WARN Act allows employers to provide fewer than 60 days’ notice for unforeseeable business circumstances, but, again, the company would be required to give as much notice as possible.  This may also open the company to litigation.  However, given the dramatic  downturn in the economy, a court may debate such an argument.  The Illinois WARN Act allows the company to provide a shorter notice if the company can show that it was actively seeking business loans or money that would have allowed it to postpone the layoff.

Di Monte & Lizak attorneys are available to assist you as you make employment decisions and traverse this difficult economic environment.

What To Do If You Are An Employee Impacted by COVID-19?

By Jonathan R. Ksiazek

COVID-19, otherwise known as the Coronavirus, has impacted every American employee and will continue to do so for the upcoming weeks and months. In such an unprecedented time, it is important for employees to know what their rights are in the event that they are laid-off, furloughed, have to stay home to take care of their children or a loved one, or become sick themselves. This article explains what steps employees can take and the proposed relief that may be available to them.

Because legislation is still pending and the situation is fluid, this article is based on the best resources available as of March 18, 2020.

If You Are Laid-Off or Need to Leave Work due to COVID-19

In the unfortunate event that you are laid-off or furloughed due to the economic impact of COVID-19, you will be entitled to file for unemployment benefits through the Illinois Department of Employment Security (“IDES”). The IDES recently adopted emergency rules to make the unemployment insurance system as responsive to the current situation as possible.

Typically, unemployment insurance (“UI”) provides temporary maintenance to employees who have been separated from their employment through no fault of their own and meet certain eligibility requirements including registering with the IDES employment service and actively seeking work.  A non-salaried employee that is furloughed because of lack of work, or had their hours substantially reduced, may also be eligible to receive UI.

The IDES has changed some of their eligibility requirements for UI in relation to employees whose workplace is impacted by COVID-19. Based on the IDES’ new emergency rules, any employee temporarily laid off or furloughed due to COVID-19 does not have to register with the IDES’ employment service or actively seek work in order to qualify for UI benefits. The IDES will consider an employee to have met this requirement as long as they are prepared to return to their job when the workplace re-opens.

If an employee is confined to their home and cannot work due to COVID-19 because they are sick, have to care for a loved one, or are under a government-ordered or recommended quarantine, that employee likely will be considered to have been separated from their employment due to no fault of their own. Thus, any employee in this situation should apply for unemployment benefits so long as they meet the other eligibility requirements such as being able and available to work and are actively seeking work from the confines of their home.

It is important to note that any employee who leaves their job voluntarily without a good reason attributable to the employer is generally disqualified from receiving UI. Thus, an employee has a duty to make a reasonable effort to work with his or her employer to resolve any issues that would cause the employee to consider leaving their position.

An employee who is sick, or whose family members are sick may be entitled to leave under the Family Medical Leave Act (“FMLA”) under certain circumstances. The FMLA entitles eligible employees of covered employers to take up to 12 weeks of unpaid, job-protected leave in a designated 12-month leave year for specified family and medical reasons. This may include the flu where complications arise that create a “serious health condition” as defined by the FMLA.

Employees on FMLA leave are entitled to the continuation of group health insurance coverage under the same conditions as coverage that would have been provided if the employee had been continuously employed during the leave period. An employee who takes leave for the purpose of merely avoiding COVID-19 would not be protected under the FMLA.

 The Families First Coronavirus Response Act

On March 16, 2020, the U.S. House of Representatives passed its the Families First Coronavirus Response Act (“FFCRA”). On March 18, 2020 the Senate passed, and the President signed, the FFCRA into law.

The FFCRA contains two main centerpieces: (1) emergency paid sick leave; and (2) a new paid Family and Medical Leave to deal with the COVID-19 “public health emergency.” The FFCRA provides the following relief to impacted employees:

  • An employee who works for a company that has fewer than 500 employees and a) must go into isolation or quarantine in accordance with a federal, state or local order; 2) quarantine based on direction from a health care provider; or, 3) who is experiencing symptoms associated with COVID-19 or is caring for an individual with symptoms associated with COVID-19; or 4) who must stay home to provide care to a child due to the closure of a school or daycare due to COVID-19 and cannot work or telework is entitled to up to two weeks of paid sick leave equal to the number of hours they work, on average, over a two week period.
  • The amount of paid sick leave is capped at $511 per day, or $5,110 in aggregate for individuals who have to quarantine or have a suspected case of COVID-19 and at $200 per day, or $2,000 in aggregate, for employees who have to stay home to care for someone who is suspected of having COVID-19 or to provide care to their children due to the closure of a school or daycare.
  • Makes paid FMLA available to an employee who has worked for their employer for at least 30 days and has to take time off due to COVID-19 to care for a minor child because of a school closure or childcare-provider loss.
  • The initial period of protected leave is 10 days of unpaid leave; however, employees can choose to use vacation, sick or personal time off.
  • Employees who are out due to childcare-related leave and cannot work from home are entitled to 10 additional weeks of paid leave at two-thirds salary.
  • The FFCRA defines the “inability to work” due to a childcare-related leave to include an inability to telework. Thus, any employee who can work from home despite having childcare loss would not entitled to pay for the additional 10 weeks FMLA.
  • Caps the amount of paid FMLA at $200 per day or $10,000 in aggregate.

The COVID-19 situation continues to rapidly change, and further legislation may be proposed to address it.  Employees and employers need information in real time, so we are continuing to closely monitor the situation and will provide moment-to-moment updates as they become available.

An Overview of the CARES Act

By Jonathan R. Ksiazek

On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security Act into law (“CARES Act”). CARES Act provides an estimated $300 billion in cash payments to most individuals and $260 billion in enhanced and expanded unemployment insurance (“UI”) to millions of workers throughout the country who are being furloughed, laid off, or are without work because of the COVID-19 pandemic.

CARES Act creates three new UI programs: Pandemic Unemployment Compensation (“PUC”), Pandemic Emergency Unemployment Compensation (“PEUC”), and Pandemic Unemployment Assistance (“PUA”). All three programs are fully federally funded. This article will discuss the cash payments and all three types of UI programs.

Cash payments: Most individuals earning less than $75,000 per year can expect a one-time cash payment of $1,200. Married couples would each receive a check and families would get $500 per child. That means a family of four earning less than $150,000 can expect $3,400. The checks start to phase down after that and disappear completely for people making more than $99,000 and couples making more than $198,000 per year. The cash payments are based either on an individual’s 2018 tax return or, if already filed, their 2019 tax filings. Individuals who receive Social Security benefits but don’t file tax returns are still eligible. They don’t need to file taxes; their checks will be based on information provided by the Social Security Administration.

Pandemic Unemployment Compensation: From March 27, 2020 through July 31, 2020, all regular UI and PUA claimants will receive their usual calculated benefit plus an additional $600 per week in compensation. PUC is a flat amount to those on UI, including those who are receiving a partial unemployment benefit check. PUC also goes to those receiving the new Pandemic Unemployment Assistance program described below. PUC may be paid either with the regular UI payment or at a separate time, but it must be paid on a weekly basis.

Pandemic Emergency Unemployment Compensation:  Provides an additional 13 weeks of state UI benefits, which will become available after someone exhausts all their regular state UI benefits. Illinois offers 26 weeks of UI benefits. To receive PEUC, workers must be actively engaged in searching for work. The bill explicitly provides, however, that “a State shall provide flexibility in meeting such [work search] requirements in case of individuals unable to search for work because of COVID-19, including because of illness, quarantine, or movement restriction.” In particular, Illinois has adopted emergency rules which do not require a worker to register with its employment service provided the employee is prepared to return to work when the employer reopens.

Most states, including Illinois, have a statutory one-week “waiting period” for people to receive UI benefits. But under the CARES Act, states that waive the one-week waiting period will be fully reimbursed by the federal government for that week of benefits paid out to workers plus the administrative expenses necessary for processing those payments.

 Pandemic Unemployment Assistance: Provides emergency unemployment assistance to workers who are left out of regular state UI or who have exhausted their state UI benefits. Up to 39 weeks of PUA are available to workers who are immediately eligible to receive PUA. The program will expire on December 31, 2020, unless otherwise extended. PUA provides income support to many workers who are shut out of the state UI systems in this country. This is because workers who are eligible for state UI are not eligible for the PUA program.

“Gig” workers. Workers eligible for PUA include self-employed workers, such as independent contractors, freelancers, workers seeking part-time work, and workers who do not have a long enough work history to qualify for state UI benefits. These “gig” workers should also qualify for regular UI because of the broad definitions of employment in many state UI laws, including in Illinois. Applicants for the above benefits will need to provide self-certification that they are (1) partially or fully unemployed, OR (2) unable and unavailable to work because of one of the following circumstances:

  • They have been diagnosed with COVID-19 or have symptoms of it and are seeking diagnosis;
  • A member of their household has been diagnosed with COVID-19;
  • They are providing care for someone diagnosed with COVID-19;
  • They are providing care for a child or other household member who can’t attend school or work because it is closed due to COVID-19;
  • They are quarantined or have been advised by a health care provider to self-quarantine;
  • They were scheduled to start employment and do not have a job or cannot reach their place of employment as a result of a COVID-19 outbreak;
  • They have become the breadwinner for a household because the head of household has died as a direct result of COVID-19;
  • They had to quit their job as a direct result of COVID-19;
  • Their place of employment is closed as a direct result of COVID-19; or
  • They meet other criteria established by the Secretary of Labor.
  • Workers are not eligible for PUA if they can either telework with pay or are receiving paid sick days or paid leave. Workers must be authorized to work in the United States to be eligible for PUA, meaning that undocumented workers will not qualify.

The PUA program will run from January 27, 2020 through December 31, 2020. Workers will be eligible for retroactive benefits and can access benefits for a maximum of 39 weeks, including any weeks for which the person received regular UI. PUA benefits are calculated the same way as they are for the federal Disaster Unemployment Assistance program under the Stafford Act, which is the model for the PUA program. PUA will have a minimum benefit that is equal to one-half the state’s average weekly UI benefit (about $190 per week).

The Fruits of Garden Variety Emotional Distress

By: Jonathan R. Ksiazek

When plaintiffs in employment cases seek damages for emotional harm caused by the defendant without professional treatment, courts often refer to these damages as garden variety emotional distress. Because of the strong connection between a plaintiff’s emotional life and their employment, careful consideration must be given to these types of damages. As several recent trial verdicts from the Northern District of Illinois show, garden variety emotional distress can often turn into a bounty for a plaintiff.

What are garden variety emotional distress damages?

A plaintiff with a strong emotional jury appeal, in and of itself, can help lead to a substantial verdict. Yet, in both a settlement and at trial it is inherently difficult to place a monetary value on emotional distress. This is especially true when a plaintiff claims to have suffered emotional injury but did not seek professional help. Thus, “[e]valuating issues as subjective and elusive as emotional damages is a task [courts] leave in the first instance to the common sense and collective judgment of juries.” Schandelmeier-Bartels v. Chicago Park Dist., 634 F.3d 372, 388 (7th Cir. 2011).

Magistrate Judge Cole in the Northern District has defined garden variety distress as “the generalized insult, hurt feelings and lingering resentment which anyone could be expected to feel given the defendant’s conduct; the normal distress experienced as a result of the [claimed injury]; the negative emotions that [plaintiff] experienced essentially as the intrinsic result of the defendant’s alleged conduct, but not the resulting symptoms or conditions that she might have suffered; the generalized insult, hurt feelings, and lingering resentment that does not involve a significant disruption of the plaintiff’s work life and rarely involves more than a temporary disruption of the claimant’s personal life.” Flowers v. Owens, 274 F.R.D. 218, 225–26 (N.D. Ill. 2011). Another court succinctly expressed that garden variety distress is “the distress that any healthy, well-adjusted person would likely feel as a result of being so victimized.” Kunstler v. City of N.Y., 2006 WL 2516625, at *9 (S.D.N.Y. Aug. 29, 2006).fruits of garden variety, emotional distress, emotional harm, professional treatment, employment, employee, distress, abuse, verbal, physical, court, jury, appeal, settlement, verdict, separation agreement, sue, protect, testify, counselor, insult, hurt, suffer, law, legal, case, plaintiff, defendant, Illinois, Chicago, state, federal, park ridge, dimonte, Lizak

Based on these definitions, courts will typically allow plaintiff seeking garden variety emotional distress to testify to their own emotions and the disruption to their life but not to any specific medical condition associated with those emotions. See, e.g., Santelli v. ElctroMotive, 188 F.R.D. 306, 309 (N.D. Ill. 1999) (limiting plaintiff’s testimony to “[b]are testimony of humiliation or disgust”); Flowers, 274 F.R.D. at 227 (noting that the plaintiff could abide by Santelli’s formulation of garden-variety damages by testifying that he felt depressed, anxious, and dejected).

The Risks of Garden Variety Emotional Distress at Trial  

Two recent cases in the Northern District of Illinois show the danger of underestimating the value of garden variety emotional distress damages.

In Sanchez v. Catholic Bishop of Chicago, 16 C 6983, 2018 WL 6192205 (N.D. Ill. 2018), the plaintiff worked as a parish assistant for the defendant. Sanchez alleged that she was terminated in retaliation for complaining about another co-worker viewing pornography on an office computer.  Sanchez, 2018 WL 6192205, at *3-4. The case proceeded to trial in November 2017, and Sanchez was awarded $200,000 in compensatory damages for her emotional pain and suffering caused due to her termination. Id., at *11. In addition, the jury awarded Sanchez $500,000 in punitive damages. Id. While Sanchez did not seek professional help from a counselor or psychiatrist, there was substantial testimony regarding the central nature of the church to Sanchez’s social and spiritual life before her termination. Id., at *11-12.  Testimony also showed that Sanchez had difficulty sleeping, gained weight, and lost friends due to her termination. Id., at *11.

The court upheld the jury’s award of emotional distress damages in the amount of $200,000 because, even though “the award is higher than the Seventh Circuit has deemed appropriate in some Title VII cases[,]” Sanchez “presented more evidence of emotional distress than the plaintiff in either of [those] cases.” Id., at *12.  The court also considered the award appropriate due to the combination of Sanchez’s loss of an income stream and the significant damage caused to her religious and social life. Id. Sanchez shows that powerful emotional testimony can resonate with a sympathetic jury.

A very recent decision by Judge Kennelly in the Northern District of Illinois illustrates similar risks. In Morris v. BNSF Railway Company, 15 cv 2923, (N.D. Ill. August 22, 2019), an African-American plaintiff who worked as a conductor for BNSF was discharged after violating internal BNSF rules. Morris alleged that his termination violated Title VII and Section 1981 because other similarly situated Caucasian employees with violations were not terminated. After a four-day trial, the jury awarded Morris $375,000 in compensatory damages for emotional distress and $500,000 in punitive damages.

The Morris court examined the award of $375,000 in post-trial motions filed by BNSF. The court recalled that Morris provided “fairly restrained” testimony about the mental and emotional consequences of his termination. Morris’s testimony did include references to the fact that he had to ask friends and family for financial help, his car was repossessed and that he was evicted from his home as a result of losing his job. The court reduced Morris’s award from $375,000 to $275,000 because “[a]lthough Morris described losing his home and his car, as well as the shock, anger, and confusion that attended his wrongful termination, there was no evidence at trial about ongoing psychological problems or associated physical symptoms.”

Both Sanchez and Morris reflect the risks of going into settlement or trial with the presumption that emotional distress damages of a “garden variety” may not be substantial. These cases show that when making or considering settlement demands in Title VII cases, emotional distress cannot be overlooked.   Even without professional help, a plaintiff whose life has been upended through the loss of a job can receive six-figure damages solely for emotional loss, in addition to any lost wages, punitive damages, and attorney’s fees.

Guidance on Commission-Based Compensation

By: Karuna S. Brunk

On September 23, 2019, the United States Court of Appeals for the Seventh Circuit released its decision in Osorio v. The Tile Shop, LLC, No. 18-2609 (7th Cir. September 23, 2019), approving draw-reconciliations as a method to smooth compensation in a commission-based system – that is, the Court essentially “blessed” a system in which an employer reconciles commissions on a pay period-to-pay period basis.

Illinois Wage Payment and Collection Act (“IWPCA”), 820 ILCS 115/, establishes when, where, and how often wages must be paid to employees.  The IWPCA specifically prohibits employers from making deductions from employees’ wages unless certain conditions are met.  Most relevant for the Osorio case, the IWPCA prohibits employers from deducting more that 15% from an employee’s wages per paycheck as repayment for previous cash advances.

In Osorio, the plaintiff sold tile and related products for The Tile Shop.  The employer paid him a guaranteed $1,000.00 per semi-monthly pay period regardless of how much product he actually sold.  If he earned less than $1,000.00 in a particular pay period, The Tile Shop would draw on future pay periods to ensure that he received his $1,000.00 and would reconcile the difference in later periods when his commissions exceeded $1,000.00.  Osorio’s contention was that The Tile Shop’s “draw” system violated the IWPCA because it involved “deducting” more than 15% from his wages as a repayment for previous cash advances.

The Seventh Circuit disagreed with Osorio’s argument.  Because the IWPCA does not explicitly define “deduction,” the Court turned to dictionary definitions.  Deductions in the payroll context refer to money that is taken by an employer from an employee’s pay for income taxes or insurance, for example.  The Court also looked to similar statutes to confirm that a “deduction” in the IWPCA is similar to withholding an employee’s earnings rather than an employer’s method of determining an employee’s earnings.  The Tile Shop, then, was not deducting Osorio’s wages – it was utilizing a formula to calculate his commission earnings.  Notably, on the date of Osorio’s separation from The Tile Shop, he was “in the red” in the amount of $2,038.47 as a recoverable draw on his future commissions, but The Tile Shop did not require that he repay this balance.

Thus, in the Court’s view, The Tile Shop’s “draw-reconciliation” method was a system to calculate a sales associate’s semimonthly commission earnings and not a deduction from the employee’s wages or final compensation.  Osorio’s pay stubs referenced these draw payments and reconciliations as “earnings” and not “deductions.”

The Tile Shop’s method of reconciling and smoothing the ebb and flow of sales may be attractive to many potential employees who are looking for some amount of consistency and certainty in their compensation.  As such, the Seventh Circuit’s decision should give many Illinois employers comfort that this method of compensating commission-based employees, especially sales associates, does not violate the law.

The IWPCA is a dynamic and complex area of Illinois law.  To avoid potential lawsuits or investigations by the Illinois Department of Labor, employers should consult with a qualified and experienced employment law attorney.

*Articles distributed by Di Monte & Lizak, LLC are advertisements and summaries for general information purposes only.  They are not full analyses of the matters presented, legal or otherwise, and may not be relied upon as legal advice.

FLSA and Wage & Hour – New Minimum Salary For Exempt Employees Takes Effect January 1, 2020

Margherita M. AlbarelloBy:  Margherita M. Albarello

On September 24, 2019, the U.S. Department of Labor issued a new Final Rule raising the minimum salary requirements for “white collar” (executive, administrative, and professional) overtime wage exemptions.  The Final Rule goes into effect on January 1, 2020. Here are the highlights:

1.     The minimum annual salary is $35,568.00, or $684.00 per week.  The current minimum is $23,660.00, or $455.00 per week.

2.     The annual minimum compensation for “highly compensated employees” (HCEs) also increases.  The new minimum for HCEs is $107,432.00 (up from $100,000.00).  Also, the Final Rule has a less rigorous duties requirement relating to HCEs.  HCEs need only perform any one of the exempt duties of the executive, administrative, or professional employee to qualify for the HCE exemption.

3.     Employers still are permitted to use nondiscretionary compensation, including commissions, to satisfy up to 10% of the new minimum salary level.  But, under the new Final Rule, nondiscretionary compensation may be paid annually, rather than quarterly.  This gives employers more flexibility in paying exempt employees nondiscretionary bonuses and commissions to satisfy the minimum salary requirement.

4.     The new Final Rule also allows a “catch-up” payment at years-end, up to 10% of the minimum salary level (that is, $3,556.80 – 10% of $35,568.00), if the employee has not earned enough nondiscretionary pay to meet the $35,568.00.

5.     By contrast, the employer must pay an HCE no less than $35,568.00, or $684.00 per week, without including nondiscretionary pay, although nondiscretionary pay can be included in meeting the $107,432.00 annual HCE pay requirement.

Employers with exempt employees who currently earn more than $455 per week but less than $684 per week, and who satisfy the duties tests, may comply with the new Final Rule by:  (1) increasing employee salaries to the new level; (2) limiting hours to preclude overtime work; and/or (3) reclassifying the employees as overtime non-exempt.

The #MeToo Impact in Illinois

By Karuna S. Brunk

The #MeToo Movement has gained traction in Illinois. Employers should take proactive steps to comply with the law and protect their businesses. There are far too many legal changes to detail every single one here, but we aim to give you a glimpse into some of the most relevant and impactful changes.

A.      The Workplace Transparency Act

On August 9, 2019, Governor Pritzker signed the comprehensive Workplace Transparency Act (WTA), with an effective date of January 1, 2020. The WTA, as its name implies, is aimed at creating a more open and transparent workplace to encourage the disclosure of illegal harassment, discrimination, and retaliation. Among the many aspects of the WTA, it creates new limitations on employment contracts, including confidentiality agreements and non-disclosure agreements. Specifically, these limitations impact contractual agreements that employers frequently present to employees at the beginning of an employment relationship.

      Under Section 1-25 of the WTA, a clause in an employment contract would be considered void if it “has the purpose or effect of preventing an employee or prospective employee from making truthful statements or disclosures about alleged unlawful employment practices” or if the clause “requires the employee or prospective employee to waive, arbitrate, or otherwise diminish any existing or future claim, right, or benefit related to an unlawful employment practice to which the employee would otherwise be entitled under any provision of state or federal law.” “Unlawful employment practice” includes discrimination, harassment, or retaliation. The WTA is written so broadly that a variety of common restrictive covenant language can and will be impacted by it, including arbitration agreements – a common tool in many employment agreements. There are certain exceptions within the WTA to these broad prohibitions based on employee specific assent to the contract language.

      Section 1-30 of the WTA also imposes new restrictions on settlement and separation agreements. Similar to the prohibitions on restrictive covenants, the WTA prohibits an employer from including language in a settlement or separation agreement that would prevent an individual from making “truthful statements or disclosures regarding unlawful employment practices” – once again, this refers to harassment, discrimination, and retaliation.

      Further, the WTA voids contracts that restrict an employee, prospective employee, or former employee from reporting allegations of unlawful conduct to federal, state, or local officials for investigation. This includes criminal conduct and unlawful employment practices – harassment, discrimination, and retaliation. Section 1-40 of the WTA also prohibits employment agreements that would restrict employees from testifying in an administrative, legislative, or judicial proceeding concerning criminal conduct or conduct amounting to harassment, discrimination, or retaliation. To an extent, employers could utilize boilerplate language in employment agreements to address these issues, but it is unclear whether courts will opt to simply enforce contracts with such boilerplate language.

B.      Other Changes to the Illinois Human Rights Act

The Illinois Human Rights Act (IHRA) is the state law that prohibits discrimination, harassment, and retaliation by employers in the State of Illinois. This law is administered by the Illinois Department of Human Rights (IDHR) – the state counterpart to the Equal Employment Opportunity Commission. Several employee-friendly changes to the IHRA are on their way:

      1. The IHRA will cover independent contractors, subcontractors, vendors, and consultants – previously only employees were protected by the IHRA.

      2. The IHRA will cover employers with one or more employees – previously, following the guidance of federal law, the IHRA defined “covered employer” as an entity with 15 or more employees.

      3. Following other states, including New York, pursuant to the WTA, Illinois will require all employers, regardless of their size or type, to provide sexual harassment training to all employees on an annual basis. The IHDR will list the requirements of such sexual harassment training protocols.

C.      Equal Pay Requirements

      Governor Pritzker also signed into law a prohibition on employers asking job applicants or their previous employers about salary and wage history. This new legislation is in an effort to narrow the wage gap between men and women.

D.      Employer Takeaways

      This article outlines the “tip of the iceberg” on the changes to Illinois law. It does not, in any way, provide a comprehensive overview of the changes. At the outset, employers should be prepared to take the following proactive measures to comply with the changes to the laws:

      1. Thoroughly review and revise form employment agreements and existing employment agreements that may be modified or extended after the WTA goes into effect on January 1, 2020, including restrictive covenants, confidentiality agreements, arbitration clauses, and non-disclosure agreements – once again, the language of the WTA is extremely broad and will impact virtually every employment contract;

      2. Review and revise employment policies and procedures, including employee handbooks – small businesses, in particular, may want to put in place harassment and discrimination policies to proactively comply with the requirements of the IHRA;

      3. Introduce management training on the new Illinois legal requirements, including a review of the new equal pay law;

      4. Take all complaints of harassment, discrimination, or retaliation seriously, including conducting thorough investigations and documenting all allegations and witness statements;

      5. Continue to document any and all employee conduct and performance issues as a proactive measure against charges of discrimination under the IHRA; and

      6. Institute sexual harassment training for employees and management – generally, we know that Illinois is following the State of New York in its requirements for mandatory sexual harassment trainings. As such, we have an understanding of what the IDHR will require in sexual harassment trainings.

Reach out to a qualified and experienced employment lawyer at Di Monte & Lizak for further information regarding the changes to Illinois law and for counsel on how best to protect your business – we strive to be your partner as you navigate current employment laws.

*Articles distributed by Di Monte & Lizak, LLC are advertisements and summaries for general information purposes only. They are not full analyses of the matters presented, legal or otherwise, and may not be relied upon as legal advice.

The Future of Work from Home Accommodations under the Americans with Disabilities Act

By Jonathan R. Ksiazek

With technological advances and modern workplaces, working from home is becoming a more common occurrence. According to the U.S. Census, in 2017 approximately 8 million people, or 5.2% of the workforce, worked from home. A recent case from the Seventh Circuit Court of Appeals highlights the challenges that employers and employees face when an employee asks to work from home as an accommodation under the Americans with Disabilities Act (“ADA”).

On June 26, 2019, the Seventh Circuit decided Bilinsky v. American Airlines, Inc., No. 18-3107. Bilinsky worked for American Airlines for over 20 years without issue. Her most recent position was as a communications specialist in the Flight Service department based in Dallas. In the late 1990s, Bilinsky was diagnosed with multiple sclerosis. After the diagnosis, American allowed Bilinsky to work from her home in Chicago as an accommodation under the ADA. Bilinsky requested to work from her home in Chicago, rather than at American’s corporate headquarters in Dallas, because hot weather aggravated her medical condition.

In 2013, American merged with US Airways. The merger required American to integrate the operations of both airlines. As part of the integration, in 2014 a Vice President at American unilaterally decided that he would require all employees to be physically present at American’s Dallas headquarters. Upon learning of the change in policy, Bilinsky emphasized to American that her medical condition required her to work from home and that relocating full-time to Dallas was not an option.

In 2014, American denied Bilinsky’s request to be allowed to continue her work from home arrangement. The parties then attempted to find alternative accommodations. During the process of discussing potential alternative accommodations, Bilinsky applied for a technical writer position located in Dallas. While the technical writer position was based in Dallas, American had allowed the previous technical writer to work from home. Due to the same policy shift requiring employees to be physically present in the Dallas office, American did not hire Bilinksy for the technical writer position.

Bilinsky continued to work from home in 2014 and into 2015, with no complaints from American. The only work event that she was unable to attend due to her medical condition was a leadership conference in early 2015. Nevertheless, in March 2015 American told Bilinsky that she had to complete her relocation to Dallas or resign. On May 1, 2015 American terminated Bilinsky’s employment.

American did not have a written job description for Bilinsky’s position. Thus, the change in Bilinsky’s job duties occurred solely from a change in her boss’s preference of not allowing work from home arrangements. American contended that after the 2013 merger, Bilinsky’s job functions changed over time such that she could no longer perform her duties from home. According to American, after 2013 Bilinsky’s position required more team-oriented activities involving frequent face-to-face meetings with team members on short notice.

The Seventh Circuit upheld the district court’s determination that Bilinsky was not a “qualified individual” under the ADA because she could not be physically present in Dallas on a full-time basis. Under the ADA, a “qualified individual” is someone who “can perform the essential functions of the employment position.”42 U.S.C. §1211(8). The ADA directs that courts give “consideration…to the employer’s judgment as to what functions of a job are essential.” Id. The EEOC defines “essential functions” as “the fundamental job duties of the employment position.” 29 C.F.R. §1630.2(n)(1). Courts typically examine the employer’s judgment, written job descriptions, the amount of time spent on the function, and the experience of those who previously held or currently hold the position.

One important factor the court noted was that after the US Airways merger multiple American employees, including Bilinksy, had their positions slowly change over time to require more face-to-face responsibilities. While the timing of Bilinsky’s changes in duties was murky and American never wrote a new job description to update the new circumstances of Bilinsky’s employment, the Court held that “the fact that American transitioned the department to new responsibilities slowly rather than all at once does not mean that the job’s essential functions didn’t change at some point after the merger.” Based on this rationale, the court found that there was no genuine issue of material fact and upheld the district court’s granting of summary judgment in favor of American.

There are several lessons for employers and employees in this decision. From the employer perspective, American faced legal jeopardy because it failed to properly document the changes in Bilinsky’s position over time. It is important for employers to update job descriptions on a regular basis, and to include all essential functions in the job description, in order to avoid any confusion regarding the job duties of a position.

Another key factor was that American’s policy restricting working from home was enacted for all positions based out of its home office in Dallas. When allowing employees to work from home, it is important to make sure that your company’s policy is enacted in a uniform manner without regard to any protected category such as disability, race or gender. It is also important to note that in its 1999 Enforcement Guidance on Reasonable Accommodation and Undue Hardship Under the Americans with Disabilities Act (revised 10/17/02), EEOC said that allowing an individual with a disability to work at home may be a form of reasonable accommodation under the ADA. Thus, each request to work from home as an ADA accommodation should be analyzed carefully on its own merits.

From an employee perspective, this is a challenging decision. Bilinsky did nothing wrong, performed well in her position, and yet was subject to a change in her employer’s preferences after being accommodated for over 15 years. She attempted to work with her employer to find another position that allowed her to work from home but was informed that the policy preventing working from home was across the board. In short, the court found that there was no way for her to show that she could meet the essential functions of her position because her medical condition prevented her from working in Dallas. This case shows the risks of litigation for plaintiffs with even the most sympathetic facts.

From both perspectives, this is an issue that is sure to be raised in future cases. Bilinsky reminds us to be mindful of our changing world and the factual specifics of each case, warning that, “Litigants (and courts) in ADA cases would do well to assess what’s reasonable under the [ADA] under current technological capabilities, not what was possible years ago.”

DI MONTE & LIZAK LEARNING SERIES – MARCH 14, 2019

On March 14, 2019, please join our attorneys Margherita Albarello and Oana Militaru at our offices between 8:00 AM and 9:30 AM for breakfast and a free Seminar on Navigating the ADA, the FMLA, Worker Compensation Absences & the benefits of Special Needs Planning. Space is limited! For any questions or to register, contact:
Mara A. Mulvany
Di Monte and Lizak
(847) 698 – 9600
mmulvany@dimontelaw.com

TIPS OF THE WEEK – Estate Planning and Elder Law

By: Anthony Ferraro

Do you have powers of attorney in place?

I know it sounds simplistic, and we have all heard this before, but perhaps the most important document that you can have upon beginning the long term care journey is the power of attorney. This is the first matter we suggest to our clients in the Chicago and Park Ridge metropolitan areas who are on the long term care journey.

Why is the power of attorney so important?

Because a power of attorney is a legal document where one person called the “principal” legally authorizes another person called the “agent” to act on their behalf with regard to either financial or health related decisions.

Without these powers of attorney in place, no one has the legal authority to act on another’s behalf and therefore we may have to resort to a court guardianship proceeding where a person appointed by the court, usually a family member, called the “guardian” has the power to make personal decisions for another usually called the “ward”. Guardianship’s are expensive, require the testimony of physicians, the appointment of a Guardian “ad litem” to investigate and protect the ward’s interest, and many other formalities have to be observed, all in the interests of protecting the ward.

These court efforts are all well and good, but if you can avoid all of this by simply having created valid powers of attorney for property and finance and healthcare matters (this may not be possible in all cases), you can streamline matters during your long-term care journey, later on.

How many different types of powers of attorney are there?

In Illinois we have two types of powers of attorney one for health and one for property (and financial matters). Sometimes these documents are called statutory powers of attorney and at other times these documents are called durable powers of attorney. The difference lies in the type of form selected to draft the power of attorney. Most of the time we recommend you stick to the statutory form power of attorney because this is the one the doctors, other health providers, nursing homes, assisted living facilities banks and financial institutions most readily recognize.

Can I create my own powers of attorney?

Yes you can, however they will not contain the necessary language that Elder Law Attorneys put into such documents such as: the power to make gifts to family members and others in order to qualify for Medicaid eligibility, the power to remove and add assets to a trust, and the power to apply for public benefits and then appeal any decision on public benefits. Unfortunately your standard power of attorney forms do not have these provisions built into them. Worse yet, if these additional powers are not built into the power of attorney, then you cannot engage in these powers under the power of attorney. They must be expressly listed in the power of attorney.

What’s the take away?

Get powers of attorney in place immediately. You could wait until later when you I need them, however if you lose the cognitive capacity to legally and ethically execute documents like these, then you may never be able to have these types of documents and hence we are left pursuing an expensive and complicated guardianship process. Get your powers of attorney in place now.

How old should you be when you start executing powers of attorney?

18 years of age. Most people don’t realize that at 18 they cannot make either financial or medical decisions for their children. But that is in fact the law, because at 18 children have reached the age of majority and without legal authorization nobody can make decisions for them as they are now adults. Ask your adult children to have their powers of attorney done now, as well.

UPCOMING: Our next installment will deal with interacting with the medical profession when cognitive capacity may be questionable, when seeking to execute powers of attorney.

Anthony B. Ferraro can be reached at AFerraro@dimontelaw.com.

EMPLOYMENT LAW DEVELOPMENTS

By: Margherita Albarello

Illinois Workplace Transparency Act, pending Senate Bill 30

This pending bill provides that employers of any size shall not require a current or prospective employee to sign a “nondisclosure agreement” that (1) limits the person’s right to disclose sexual harassment or any other form of workplace discrimination; or (2) forces the person to arbitrate such claims. The bill also provides that agreements containing such provisions that were entered into before the effective date of the Act are voidable. The backlash against mandatory arbitration and non-disparagement clauses stems from the social changes occurring through the #MeToo movement and other private and public initiatives regarding sexual assault and sexual harassment in the workplace.

Illinois Biometric Information Privacy Act (BIPA) – No actual harm required

Businesses use biometric identifiers like finger, hand, or facial scanning to track employee work time and customer sales transactions. Since 2017, over 100 class actions have been filed claiming that these employees and consumers are “aggrieved” under BIPA because they did not receive advance written notice and agree in writing to the scanning. In defense, businesses submitted that a person is “aggrieved” and may seek liquidated damages and other relief only if he suffered some actual injury apart from the technical violation of BIPA itself. Conflicting Illinois appellate court decisions on the statute’s definition of “aggrieved” followed, and in May 2018, the Illinois Supreme Court took the issue on appeal. On January 25, 2019, the Court unanimously ruled in Rosenbach v. Six Flags Entertainment Corp., that, a person need not suffer actual injury or adverse effect to bring a BIPA action.

Margherita Albarello can be reached at malbarello@dimontelaw.com.

Whose Ring Is It Anyway?

By Julia Smolka

Love is in the air. Between Christmas and Valentine’s Day, there is a surge of wedding proposals. There is also a surge in the purchase of expensive diamond engagement rings. Usually, those engagements end in wedding bells and nuptials. However, sometimes they do not. Current statistics show twenty percent of engaged couples break off engagements before weddings take place.

When the engagement ends, who ends up with the ring?

An engagement ring, given as part of a proposal, has been found to be a conditional gift. It is a gift, given by one party to another in contemplation of marriage between the parties. The proposal itself is a contract between two people – it’s a promise to marry. Once the parties are married, the condition for the gift is met, making the party who received the engagement ring the owner of the ring. The ring is a gift and it cannot be taken back by the giver.

Illinois courts have typically required the return of an engagement ring if the parties fail to marry. The courts found that an engagement ring is a gift given in contemplation of a marriage and is a conditional gift, meaning if the marriage does not happen, the ring should be returned to the proposing party.

But what happens if the party proposed to breaks off the engagement? What if the party in possession of the ring acts in such a way which makes going forward with the marriage impossible? What if the proposing party commits adultery during the engagement? What if there exists other abuse, addiction or other faults committed by the proposing party, making calling off the wedding a valid choice by the party in possession of the engagement ring? What if the proposing party is at fault for the breakup? The cases as they are now being decided find that fault does not matter. The ring must be returned if the marriage does not go forward.

The underlying law used as basis for the lawsuit is called a replevin action, and under Illinois replevin laws, there is no mention of assessing or considering “fault” when determining who is entitled to keep the ring. It matters who purchases the ring, why it was purchased, and why the party has the ring in his or her possession. The judges do not look at the party who was “bad.” The judge must decide which party has the right to possess and keep the ring.

I recently represented a woman who was given a very expensive diamond cocktail ring by her boyfriend. They broke up and she kept the ring. Six years after the breakup, the former boyfriend filed suit for return of the ring, claiming it was an engagement ring and my client had wrongfully kept it. My client maintained the position that it was just a gift, no proposal was made, no acceptance given and no engagement, meaning no conditional gift was made and the ring belonged to my client. The judge dismissed the action, without having to decide whether the ring was an engagement ring because the former boyfriend brought the lawsuit six years after the breakup. There is a five-year statute of limitations from the time of a breakup to bring an action to recover an engagement ring. My client’s former boyfriend was a year too late.

This was an interesting case, and I enjoyed working on it. If you have any interesting litigation cases, call me. I would love to discuss them with you.

Builders Beware

By Alan L Stefaniak

We have all heard the phrase “Buyer Beware”. A recent Illinois Appellate Court decision turns the table on residential homebuilders and those of you who build houses now “need to be aware.” Illinois has long recognized the Implied Warranty of Habitability in residential construction. The purpose of the implied warranty is to protect home buyers from latent defects and place the responsibility for the costs of repair on the builder-vendor who created the latent defect.

Over the years the implied warranty of habitability has been expanded to apply to subsequent purchasers if there is a short intervening ownership between that of the first purchaser. The warranty has also been held to apply not only to builders but developers and in some cases to subcontractors if the original builder is no longer in business. The implied warranty of habitability not only applies to new construction but also remodeling. While Illinois Courts have expanded the warranty from what was first announced, the implied warranty can be disclaimed if there is a knowing disclaimer that is conspicuous, fully discloses its consequences and clearly sets forth that the disclaimer is the agreement of the parties.

The Illinois Appellate Court, First District, recently extended the implied warranty of habitability to a subsequent purchaser who bought the house three years after it was first built; the defect didn’t arise until a year after the second sale which means four years after construction; the subsequent purchaser bought the house as is and what’s even more disturbing is that in the initial sale there was a disclaimer of the implied warranty that met all the criteria for a valid waiver.

The Appellate Court ruled that since the implied warranty of habitability does not depend upon privity of contract and since the second purchaser did not have notice that the implied warranty had been waived, the subsequent purchaser could bring a claim against the builder for breach of the implied warranty. In my opinion this decision makes residential home builders virtually guarantors of the house. The only salvation in the Court’s decision is that it held the subsequent purchaser still has to prove that there are in fact latent defects in the house; those defects interfere with the reasonably intended use of the house; and that the latent defects arose within a reasonable time after the house was purchased. The case was sent back to the trial court for determination of these issues. It remains to be seen if a reasonable time means from initial construction or after the second purchaser buys the residence.

Almost all residential builders include a disclaimer of the implied warranty of habitability in their contracts. However, this decision means that is no longer protection against the claim of a second purchaser. How can a builder protect itself? I suggest if you are building on your own lot you have the waiver of the implied warranty on a separate document and record it. If you’re building on your customer’s property include in the contract a provision that gives you the right to record the disclaimer of the implied warranty of habitability. If this is done at least an argument can be made that the subsequent purchaser had constructive notice that the implied warranty was waived. If you would like assistance in preparing such a document contact me.

Another Appellate Court Smack Down for Architects and Engineers

By Alan L Stefaniak

The Illinois Mechanic’s Lien Act clearly provides that architects, structural engineers, professional engineers (i.e. civil engineers) and surveyors have a lien if they provide “any services or incur any expense” in, for or on a lot or tract of land for the purpose of improving the property. For some reason the Illinois Appellate Courts don’t want to recognize this language of the Act and continue to hold that these professionals have to show their services improved the property before they can have a lien. I addressed this issue in the August, 2010 issue of this newsletter. Just recently a majority opinion of the Illinois Appellate Court, Third District, got it wrong again.

In this most recent smack down for architects and engineers, a civil engineering firm did preliminary engineering and performed land surveying services for a preliminary and final plat. The development did not proceed. The civil engineering firm claimed a lien for its services and filed a lawsuit to foreclose its lien. The Bank holding a mortgage on the property sought dismissal of the engineer’s lien. A motion for summary judgment was granted in the Bank’s favor on the ground the civil engineering and land surveying services provided did not constitute an improvement to the property. The civil engineering firm appealed.

The majority of the Appellate Court upheld the trial court and again relied upon a line of decisions that hold the purpose of a mechanic’s lien is to permit a lien where a benefit has been received by the owner and where the value or condition of the property has been increased or improved by reason of the furnishing of labor and materials. The Court’s reasoning is wrong. What the Appellate Court failed to realize is that the line of decisions relied upon are the typical situation where a contractor or subcontractor furnishes labor and materials to a job. Architects and engineers don’t furnish the usual type of materials and labor. They provide designs and drawings but they do so for the purpose of improving land and the Act specifically states they have a lien for the type of services they provide. The fact that a development doesn’t go forward doesn’t mean the services were not provided for the purpose of improving the property.

One Judge dissented and this judge got it right. The dissent stated the appropriate inquiry is whether the services were provided “for the purpose of improving the subject property.” This Judge referenced the specific language of the Act and stated the Act allows architects and engineers to have a lien regardless of whether the services actually improve the property. The dissent referred to the fact the engineering services were used to obtain financing and municipal approval for the development. As this Judge stated, “Professionals who design buildings and developments should not be penalized for an owner’s choice not to proceed with a construction project.”

In my opinion this Appellate Court decision is flat out wrong since it ignores the explicit language of the Illinois Mechanic’s Lien Act. Hopefully this engineering firm will petition the Illinois Supreme Court to allow a further appeal to our State’s highest Appellate Court. This is a significant issue and should be addressed by our Supreme Court. Hopefully they will read the Act and enforce the Act’s explicit provisions in favor of design professionals.

Brother, Can You Spare a Dime?

Richard W. LaubensteinBy Richard W. Laubenstein

Shakespeare once said “neither a borrower nor a lender be.” Shakespeare obviously didn’t have a large family. If you have been able to build up a nice nest egg, you may soon find siblings, children or other members of your family and friends asking you to help them out.

Before you lend a helping hand, consider that almost 14% of personal loans (those made by individuals to family or friends) end up in default. That’s almost ten times the national average of defaults on bank loans. The main reason for the difference? Bankers aren’t afraid to ask questions before they decide to make a loan.

You are about to assume a big risk. Before you do, you have a right to know how your money is going to be used. If you are helping your family member or friend with a loan for their business, ask how much of their own money is being put at risk. Are there any other lenders? Can your loan be secured by equipment, stock, vehicles or real estate?

Your family member or friend may have a history of getting in debt over his or her head. If your borrower wants you to give them money that will be used to pay off other debt, you should ask how the borrower intends to change his or her spending habits. If your borrower continues in his or her cycle of debt, you could well find yourself in the position of having loaned and lost money that you were counting on for your future. You should not make a loan to family or friends unless you can afford to put your money at risk.

If you decide to make a private loan, make sure that the loan is well documented. Documenting the loan helps increase the likelihood of repayment. Borrowers take the loan (and the corresponding obligation to repay it) more seriously if it is in writing. In Illinois, interest rates are limited unless the agreement is placed in writing. If you have to sue to try to collect, you cannot collect your attorneys fees and costs unless the agreement is in writing. Our firm can help you prepare a note, repayment schedule and documents to secure your loan.

Documenting your private loans will help keep your own financial records straight. For example, if you have several children and you have advanced a loan to one of your children, having that loan documented will help keep the peace between your family members in the event you die, so that the various rights and claims to your estate can be determined.

In practical terms, if you have been blessed with the good fortune of having money socked away, you may be unable to turn down a family member in need. If you make a loan that winds up being uncollectible, and you have documented the loan, you may be able to write it off your taxes as a bad debt. If you can afford it, and you feel the money is going for a good cause, you may consider making the advance of money a gift from the beginning, instead of calling it a loan. We can help you document the gift for federal tax purposes. We can also help you maximize the amount of money available to you by assisting you with tax advice. Whether you make a loan or a gift, you should give us a call to help you document your transaction. Our October newsletter will discuss gifting proceeds from the sale of your assets.