There is finally some good news for condominium unit owners who’ve been frustrated by the FHA’s prohibition on “spot loans” in developments that haven’t obtained certification. Pressure from real estate advocacy groups is causing the FHA to seriously consider relaxing the ban and bring back spot loans.
Ken Harney, a nationally renowned author and expert on real estate and mortgage finance, wrote in a recent column on April 8, 2014 that "Officials are mum on the details and timing, but they confirmed to me on Friday that reviving this key financing option is now under active study. The main reason: FHA is under growing political and trade group pressure — NAR and the Community Associations Institute especially — to do so."
Why is this important? A significant number of condo association boards have either chosen not to apply to FHA for approval of the entire development, or are unable to do so because their associations don't meet the standards or they feel they can't afford the cost of hiring an attorney or other professional to assist them. Under current rules, without FHA certification of the project as a whole – based on evaluations of the association’s financial accounts, reserves, insurance, renter-to-owner ratio and a long list of other factors – no unit in the development is eligible for an FHA mortgage.
This concept particularly affects moderate income, first-time and minority buyers -- and its ironic, considering that the name of the agency has "Fair Housing" in it.
If a condo association does not have pre-approval from the FHA, existing unit owners who want to obtain a reverse mortgage to tap their equity cannot qualify. Harney commented, "The FHA’s home equity conversion mortgage (HECM) program dominates the reverse mortgage field and accounts for an estimated 90 to 95 percent of all volume. Without access to FHA, seniors who live in a non-certified condo project are cut off from a major potential source of needed cash to pay bills and support their retirement years."
The inability to obtain spot loans has a direct affect on the selling prices of condos. I have had several clients selling condo units who lost money when the only buyers interested only qualified for low down payment FHA financing -- and their condo association was not approved. One egregious example is a client who was the executor of his father's estate. His Dad had died owning a condo unit. The family sunk thousands into fixing the unit up to sell, and then discovered the association was not FHA approved. Because of so many foreclosures and abandoned units, the association complained that they weren't even sure they could gather a quorum for a meeting to seek FHA approval -- and the financial health of the association would probably result in the FHA application being rejected. The client was forced to lower the price so cash buyers might be interested -- selling for a price that was both well below market rates and failed to recoup the repair investment.
Why did the FHA ban spot loans in the first place? From 1996 to 2010, these kinds of loans were permitted in condo projects, but did not have adequate management, monitoring and quality control measures in place. Eric Boucher, an FHA condo approvals specialist with ReadySetLoan Condo Team LLC in South Windsor, Conn., says the inevitable result was that some developers and loan officers took advantage and obtained FHA-insured loans on units in projects that did not meet even minimal standards. Sometimes the loans were secured by structures that didn’t even qualify as legal dwelling units -- for example, a motel in Florida that was converted to a condominium received FHA spot loans on every unit the building, even though not one had a kitchen.
But because FHA lacked the administrative capacity to carefully review and process loan package submissions and track spot loan endorsements project by project, the loans were all approved. In addition, the FHA recognized that many condo associations used concepts such as the right of first refusal and board approval of transfers to discriminate against potential buyers. When the FHA retooled its condo oversight in 2010, it instituted a much more rigorous certification process to identify eligible developments to prevent fraud, abuse, and discrimination, and totally banned spot loans.
The new certification process has plenty of controversy of its own, and thousands of condo boards have declined to apply. However, FHA officials claim they now have much better oversight and management controls in place. They also note that in any resumption of spot loans, much stricter standards would be in place for a unit to qualify, along with much more intensive monitoring.
An attendee at a recent FHA-sponsored private roundtable for condo professionals quoted a senior official say saying that any new version “won’t be your father’s spot loan program.”
What does this mean? If spot loans are brought back, they certainly won't be as easy to get as they were prior to 2010. Non-certified projects will probably get the same level of rigorous review that certified projects do. Approvals will be slow, and the costs will be higher. But to have this option back opens a door to condo owners, lenders, and real estate professionals that has been closed for years. And it may be the only hope for the revitalization of the condominium market in the metro Chicago area, especially the south suburbs.
Tuesday, April 15, 2014
Wednesday, March 26, 2014
The Death and Potential Revival of the Illinois Eavesdropping Law
On March 20, 2014, the Illinois Supreme Court, in two companion cases (People v. Melongo, 2014 IL 114852, and People v. Clark, 2104 115776) declared the State's Eavesdropping statute unconstitutional.
This was big news. The Eavesdropping statue had come under criticism for being used to target citizens who tried to expose corruption and incompetency in law enforcement and judicial officials, and I believe the Court's decision to invalidate the law was both wise and sound. But I believe the essence of what the Eavesdropping law in Illinois was meant to protect might be lost in all the hoopla over its application to the unauthorized recording of police or governmental activity.
This was big news. The Eavesdropping statue had come under criticism for being used to target citizens who tried to expose corruption and incompetency in law enforcement and judicial officials, and I believe the Court's decision to invalidate the law was both wise and sound. But I believe the essence of what the Eavesdropping law in Illinois was meant to protect might be lost in all the hoopla over its application to the unauthorized recording of police or governmental activity.
The Illinois General Assembly enacted the eavesdropping law in 1961. The statute originally criminalized the use of an eavesdropping device to hear or
record any oral communication without “the consent of any party
thereto.” The original statute also provided a civil remedy. It also provided that evidence obtained in violation of the statute is not admissible in a criminal or civil trial. In 1976, the legislature amended the statute to require the
consent of all parties to the communication.
The 1976 amendment was applauded as giving great strength to personal privacy -- even in a situation with multiple parties, a conversation could not be recorded without everyone's consent. This was a much more stringent standard than the Federal law (passed in 1967) which only required the consent of one party to the conversation. Plus, as technology began to advance, the law's limiting language which focused on "oral communications" made the growing ubiquity of video recording appear to be a loophole. Indeed, this was the beginning of the problem. If I brought a video camera to my son's little league game, I could record the images and broadcast them without anyone's consent. But according to the express language of the law, I could not include the audio portion of the recording without the consent of everyone in attendance.
The conflict between the stricter State law and the Federal standards began to come out in Federal Court -- and the Federal Courts simply ignored the Illinois standard. Then, in 1986, the Illinois Supreme Court weighed in on the eavesdropping law for the first time. In People v. Beardsley, 155 Ill. 2d 47 (1986), the Court determined whether an unauthorized recording of a conversation between two police officers constituted a violation of the act. In Beardsley, the defendant had been arrested and placed in the back seat of a squad car. The two officers who arrested him rode in the front seat. The defendant had a tape recorder, and recorded the discussions between the two policemen. The officers claimed they did not
know of or authorize the recording, although they knew the defendant
possessed a tape recorder. In looking at the argument, however, the Court simply made some obvious and logical conclusions: In this instance, the person making the
recording was a party to the conversation; the recording party could not
be prohibited from repeating what he was told by the other participants in the conversation. The Court determined thatwhen a party to a conversation makes a recording of the
conversation the recording is simply a means of preserving an accurate
record of what was said. Despite the language of the Eavesdropping statute, the court found there is no eavesdropping in that situation
because the people being recorded had no expectation of privacy in what they told the
person who recorded the conversation. The Court found the police had no legitimate expectation of privacy
with respect to their conversation because they had held the conversation in the presence of the defendant. In effect, neither party needed to give consent if the conversing parties
did not have an expectation of privacy.
The Beardsley case was hot off the presses while I was in law school, and sparked a lot of inspired debate. Many of us 1L's and 2L's argued that the plain language of the statute required everybody's consent to the conversation, so that is how it should be interpreted. Others argued that in the context of other areas of the law -- defamation, common law privacy, and attorney client privilege, for example -- the expectation of privacy analysis was always a turning point in determining whether something was meant to be made public. There was a basic logic to the Beardsley conclusion. If I say something inflammatory as a speaker in front of an auditorium full of people, and someone surreptitiously records what I said, I am hard pressed to argue that fits into the concept of "Eavesdropping."
But there are times when a conversation between two or more people could be conducted in a manner that invokes the expectation of privacy. For example, in the early 1990s, I represented a commodities trader who had been accused of churning his clients' accounts -- that is, his clients accused him of buying and selling solely for the purpose of collecting commissions, while doing little to benefit the client's bottom line. Part of the evidence presented against the trader were recordings of telephone conversations between the trader and one of his clients which were made without the trader's knowledge. My client was concerned that the client's sole purpose in making the calls was to try and entrap him, so he wanted the tapes suppressed. I was able to convince the opposing counsel to agree to not use the tapes by arguing the concept of "expectation of privacy" in a private telephone conversation and the potential of filing a civil action to enforce the eavesdropping act.
In a situation like I just described, the conclusion that all you need is one party's consent to record the conversation seems to run contrary to the broad interpretation the Courts were giving to Beardsley. Yet, in People v. Herrington, 163 Ill. 2d 507 (1994), the Court took Beardsley a step further, and clarified that no expectation of privacy existed if one of the parties to the conversation was the recording party, allowing any person to secretly record a conversation as long as they were a participant.
Howls of protest followed from those who felt the Eavesdropping statute had been made a nullity. In the wake of these two decisions, the Illinois General Assembly amended and strengthened the statute by making it applicable to any oral communication “regardless of whether one or more of the parties intended their communication to be of a private nature under circumstances justifying that expectation.” This amendment clearly sought to overrule the Illinois Supreme Court decisions that effectively narrowed the statute. Now, it was clear that all parties needed to give consent before any recording could take place.
In a situation like I just described, the conclusion that all you need is one party's consent to record the conversation seems to run contrary to the broad interpretation the Courts were giving to Beardsley. Yet, in People v. Herrington, 163 Ill. 2d 507 (1994), the Court took Beardsley a step further, and clarified that no expectation of privacy existed if one of the parties to the conversation was the recording party, allowing any person to secretly record a conversation as long as they were a participant.
Howls of protest followed from those who felt the Eavesdropping statute had been made a nullity. In the wake of these two decisions, the Illinois General Assembly amended and strengthened the statute by making it applicable to any oral communication “regardless of whether one or more of the parties intended their communication to be of a private nature under circumstances justifying that expectation.” This amendment clearly sought to overrule the Illinois Supreme Court decisions that effectively narrowed the statute. Now, it was clear that all parties needed to give consent before any recording could take place.
However, while most citizens were prohibited from recording conversations without every participant's consent, the statute made exceptions for the police to make records in specific situations as part of their law enforcement duties without anyone's consent. The statute allowed for the police to have the discretion
to record an array of encounters which some courts refer to as “enforcement
stops” without the consent of the other parties involved. Enforcement
stops include “traffic stops,” “motorist assists,” “pedestrian stops,”
and “requests for identification.” Meanwhile, a subsequent amendment to the Act provided that an individual who, in violating the eavesdropping statute, records an oral conversation of a police officer or
certain other public officials in the performance of their official
duties commits a class one felony -- which could get a violator up to 15 years in prison and a $250,000 fine.
In addition, another amendment to the Eavesdropping statute attempted to modernize the offense, adding "electronic communication" to the scope of the law. While this eliminated the audio/video anachronism, the amendment was only applied to the criminal violations of the act. Thus, there was no civil liability for a video recording or snooping in someone's e-mail.
In the latest cases, the Court obviously had problems with the application of the law. The Court determined that the statute was vague, too restrictive, and "makes innocent conduct subject to prosecution." The court went was also critical of the statute not requiring any "culpable mental state: (meaning you didn't have to intend to violate the law) and that it violated substantive due process under both the United States and Illinois constitutions.
I believe the court made the right decision in striking down the law. Clearly, the application of the law “burdens substantially more speech than is necessary to serve a legitimate interest in protecting conversational privacy.” The Court noted that “The statute criminalizes the recording of conversations that cannot be deemed private: a loud argument on the street, a political debate on a college quad, yelling fans at an athletic event, or any conversation loud enough that the speakers should expect to be heard by others. None of these examples implicate privacy interests, yet the statute makes it a felony to record each one. Judged in terms of the legislative purpose of protecting conversational privacy, the statute’s scope is simply too broad.
I also believe the history of the use of the statute by prosecutors to inhibit the use of recordings to investigate police misconduct or judicial/governmental incompetence -- and nothing else -- also indicates that conversational privacy really isn't at the heart of its enforcement. And the punishment doesn't fit the crime. The defendant in the Melongo case spent over a year in prison for recording and publishing on the internet three telephone conversations with a county court official. The prosecution made no consideration for whether there was an actual violation of privacy, or if confidential information was disclosed. Just the fact the recording had been made was enough to subject the defendant to conviction. Perhaps the Melongo defendant should have been punished for violating the law -- but this is where the concept of a civil remedy or a requirement for a culpable mental state/intent needs to be considered. Then again, we are talking about a public official -- where the expectation of privacy is certainly different than the case I cited earlier, between a private businessman and his customer.
Clearly, the Illinois Eavesdropping law was a mess in the way it was written, and even a bigger mess in enforcement.
But I offer a word of caution. I believe the analysis of the Beardsley case was on the right track.
I feel the need to continue the protection of conversational privacy by requiring all parties to a conversation need to consent to the recording. But if the language of a replacement statute was clearer regarding some of these problem areas, the statute would be enforceable and fair.
For example, the statute should have a requirement of "reasonable expectation of privacy." This would take away liability for recording my son's little league game, or the speech at the political rally. It would also make a closer call for things like my client, the commodities trader. It is arguable that I do have a reasonable expectation of privacy in a telephone conversation with a single person, or in an e-mail exchange with that person. The same might even be true in a situation involving family situations -- divorce cases, for example. Should a divorcing spouse be allowed to surreptitiously record telephone conversations, or secretly videotape an in-home confrontation, and use the recordings against the other in court?
I think specifically exempting public officials, except in instances where there would be an obviously reasonable expectation of privacy, would be proper. We shouldn't let the police, court officials, or public transit officials off the hook when illegal behavior is caught on video, and use a law that was meant as a shield to protect against privacy intrusion and turn it into a sword to criminalize non-criminal conduct and put people in jail for what amounts to at best a minor civil violation.
In the end, its the civil remedy that needs more emphasis. Back in the early 1990s, when I was defending the commodities trader case, I went to the State's Attorney's office to see if there was a chance of bringing criminal charges for violating the Act. They laughed. Not to mock me, but to simply say that they had a lot better things to do with their resources. Besides, what I wanted was to exclude the recordings from evidence, not put the other party in jail. An emphasis on civil remedies, with a wide panoply of choices, would make the Eavesdropping prohibitions more useful, and yield fair results. For example, the prohibition of using the recordings against the non-consenting party may be enough. The requirement that the recordings be destroyed may be enough. The requirement that publication of the recordings cease may be enough. Sending the Merengo defendant to jail for over a year for publishing three telephone conversations with a court official, where we don't even know if the conversations really portrayed that official in a bad light or went beyond the auspices of her official duties, just seems wrong. A lesser penalty, arising in civil law, would have been much more appropriate.
While we all might applaud the death of the Illinois Eavesdropping Act, for all its faults, I do fear for the void it leaves. We need a re-write of the statute designed to truly protect private communications. It's certainly doable. And I hope it happens soon.
In addition, another amendment to the Eavesdropping statute attempted to modernize the offense, adding "electronic communication" to the scope of the law. While this eliminated the audio/video anachronism, the amendment was only applied to the criminal violations of the act. Thus, there was no civil liability for a video recording or snooping in someone's e-mail.
In the latest cases, the Court obviously had problems with the application of the law. The Court determined that the statute was vague, too restrictive, and "makes innocent conduct subject to prosecution." The court went was also critical of the statute not requiring any "culpable mental state: (meaning you didn't have to intend to violate the law) and that it violated substantive due process under both the United States and Illinois constitutions.
I believe the court made the right decision in striking down the law. Clearly, the application of the law “burdens substantially more speech than is necessary to serve a legitimate interest in protecting conversational privacy.” The Court noted that “The statute criminalizes the recording of conversations that cannot be deemed private: a loud argument on the street, a political debate on a college quad, yelling fans at an athletic event, or any conversation loud enough that the speakers should expect to be heard by others. None of these examples implicate privacy interests, yet the statute makes it a felony to record each one. Judged in terms of the legislative purpose of protecting conversational privacy, the statute’s scope is simply too broad.
I also believe the history of the use of the statute by prosecutors to inhibit the use of recordings to investigate police misconduct or judicial/governmental incompetence -- and nothing else -- also indicates that conversational privacy really isn't at the heart of its enforcement. And the punishment doesn't fit the crime. The defendant in the Melongo case spent over a year in prison for recording and publishing on the internet three telephone conversations with a county court official. The prosecution made no consideration for whether there was an actual violation of privacy, or if confidential information was disclosed. Just the fact the recording had been made was enough to subject the defendant to conviction. Perhaps the Melongo defendant should have been punished for violating the law -- but this is where the concept of a civil remedy or a requirement for a culpable mental state/intent needs to be considered. Then again, we are talking about a public official -- where the expectation of privacy is certainly different than the case I cited earlier, between a private businessman and his customer.
Clearly, the Illinois Eavesdropping law was a mess in the way it was written, and even a bigger mess in enforcement.
But I offer a word of caution. I believe the analysis of the Beardsley case was on the right track.
I feel the need to continue the protection of conversational privacy by requiring all parties to a conversation need to consent to the recording. But if the language of a replacement statute was clearer regarding some of these problem areas, the statute would be enforceable and fair.
For example, the statute should have a requirement of "reasonable expectation of privacy." This would take away liability for recording my son's little league game, or the speech at the political rally. It would also make a closer call for things like my client, the commodities trader. It is arguable that I do have a reasonable expectation of privacy in a telephone conversation with a single person, or in an e-mail exchange with that person. The same might even be true in a situation involving family situations -- divorce cases, for example. Should a divorcing spouse be allowed to surreptitiously record telephone conversations, or secretly videotape an in-home confrontation, and use the recordings against the other in court?
I think specifically exempting public officials, except in instances where there would be an obviously reasonable expectation of privacy, would be proper. We shouldn't let the police, court officials, or public transit officials off the hook when illegal behavior is caught on video, and use a law that was meant as a shield to protect against privacy intrusion and turn it into a sword to criminalize non-criminal conduct and put people in jail for what amounts to at best a minor civil violation.
In the end, its the civil remedy that needs more emphasis. Back in the early 1990s, when I was defending the commodities trader case, I went to the State's Attorney's office to see if there was a chance of bringing criminal charges for violating the Act. They laughed. Not to mock me, but to simply say that they had a lot better things to do with their resources. Besides, what I wanted was to exclude the recordings from evidence, not put the other party in jail. An emphasis on civil remedies, with a wide panoply of choices, would make the Eavesdropping prohibitions more useful, and yield fair results. For example, the prohibition of using the recordings against the non-consenting party may be enough. The requirement that the recordings be destroyed may be enough. The requirement that publication of the recordings cease may be enough. Sending the Merengo defendant to jail for over a year for publishing three telephone conversations with a court official, where we don't even know if the conversations really portrayed that official in a bad light or went beyond the auspices of her official duties, just seems wrong. A lesser penalty, arising in civil law, would have been much more appropriate.
While we all might applaud the death of the Illinois Eavesdropping Act, for all its faults, I do fear for the void it leaves. We need a re-write of the statute designed to truly protect private communications. It's certainly doable. And I hope it happens soon.
Thursday, July 11, 2013
Lessons for Employers and Managers . . . from Paula Deen
The controversy swirling around Paula Deen,, and her purported use of the "N" word as part of her vocabulary, has been at the center of a media maelstrom. On one side we see Ms. Deen losing her lucrative position as a Food Network celebrity chef, the cancellation of most of her even more lucrative endorsement arrangements, and the vitriolic enmity of much of the mainstream media. On the other side, Ms. Deen is defended by those who argue there is a double standard, and that simply because she used an offensive racial epithet in the past she shouldn't be shunned by society, when so many celebrities and other public figures have done so much worse. For example, there has been a Facebook "Meme" circulating listing many of the other Food Network Celebrity Chefs and all of their social slips and legal conundrums, including adultery, slander, financial fraud, and sexual harassment. Surely Paula's "slip of the lip" in the past pales by comparison.
But Paula Deen's use of the "N" word must be kept in proper context -- a context in which Employers and Managers must be wary. Paula's indiscreet comments weren't overheard at a cocktail party. She didn't slip up in a casual conversation. She is accused of regularly using this language in the context of a workplace environment, where it is allegedly part of an overall employment atmosphere that was hostile to African American workers.
Paula Deen, in partnership with her brother, runs a very famous and successful restaurant in Savannah, Georgia. An employee of that restaurant filed a lawsuit, complaining of sexual harassment and discrimination in the workplace. One of the specific allegations was that Deen and other restaurant managers often made racist comments disparaging African-Americans -- specifically using the "N" word.
After this civil suit was filed, the plaintiff's attorney deposed Ms. Deen. He asked her pointed questions about what was going on at the restaurant on a day to day basis, and what kind of things managers would say to employees. Ms. Deen was under oath, and had to tell the truth. While she may have attempted to soft pedal the matter, she ended up admitting that she had used racially charged language in the workplace. The reason why its become a matter of public speculation is that a copy of Ms. Deen's deposition testimony was filed with the court, making it a matter of the public record.
This means that anyone can see exactly what Paula Deen said. The evidence is pretty damning. This isn't a case of Ms. Deen merely telling a racist joke, or slipping up and falling back into the phrases she may have heard as a child growing up in the South (I've heard that used as an excuse often by older white folks to justify their continued entrenchment in a segregated mind set. "Back in my day, we used that word all the time, and nobody thought nuthin' of it"). Paula Deen wasn't just expressing her opinion, or exercising her first amendment rights. She was using this offensive language in the context of managing her employees. In the context of conducting business. And while it could be argued that the degree of her offense might not be as great as public opinion finds, there is one inescapable conclusion. She admits to doing it, under oath.
I advise my business clients to be so careful about these things. Not just intend to do right, but establish well written, easy to understand employment policies that express not just that such behavior will not be tolerated, but that those who do not comply will be disciplined or terminated. That violations will be promptly investigated and decidedly dealt with. I advise them to send a message to their employees that management will protect not just their livelihood, but their dignity. They need to establish a workplace atmosphere that will remain as free from this kind of hostility as possible.
Paula Deen is accused of much more than just blithely dropping the "N" word on occasion. She is charged with fostering an atmosphere of racial discrimination against African Americans in her place of business. The context of the situation cannot be minimized. She now watches her livelihood slip away from her not because she was a bad person or "politically incorrect." She was (allegedly) a poor manager, allowing unacceptable social concepts to control the business environment under her authority.
The lesson employers and managers can take away from Paula Deen is that the lack of solid employment policy making and our own insensitivity to our employees can lead to ruin. Many of my business clients with employees want me to help them to head off employee charges and lawsuits, and then, when charges are filed, to help dispose of them or win. But Paula Deen's situation shows that there is so much more at stake than a lawsuit. She may eventually lose everything she has over this. Even before the pre-trial conference is held.
And that should make Employers and Managers pause, and ponder these concepts.
But Paula Deen's use of the "N" word must be kept in proper context -- a context in which Employers and Managers must be wary. Paula's indiscreet comments weren't overheard at a cocktail party. She didn't slip up in a casual conversation. She is accused of regularly using this language in the context of a workplace environment, where it is allegedly part of an overall employment atmosphere that was hostile to African American workers.
Paula Deen, in partnership with her brother, runs a very famous and successful restaurant in Savannah, Georgia. An employee of that restaurant filed a lawsuit, complaining of sexual harassment and discrimination in the workplace. One of the specific allegations was that Deen and other restaurant managers often made racist comments disparaging African-Americans -- specifically using the "N" word.
After this civil suit was filed, the plaintiff's attorney deposed Ms. Deen. He asked her pointed questions about what was going on at the restaurant on a day to day basis, and what kind of things managers would say to employees. Ms. Deen was under oath, and had to tell the truth. While she may have attempted to soft pedal the matter, she ended up admitting that she had used racially charged language in the workplace. The reason why its become a matter of public speculation is that a copy of Ms. Deen's deposition testimony was filed with the court, making it a matter of the public record.
This means that anyone can see exactly what Paula Deen said. The evidence is pretty damning. This isn't a case of Ms. Deen merely telling a racist joke, or slipping up and falling back into the phrases she may have heard as a child growing up in the South (I've heard that used as an excuse often by older white folks to justify their continued entrenchment in a segregated mind set. "Back in my day, we used that word all the time, and nobody thought nuthin' of it"). Paula Deen wasn't just expressing her opinion, or exercising her first amendment rights. She was using this offensive language in the context of managing her employees. In the context of conducting business. And while it could be argued that the degree of her offense might not be as great as public opinion finds, there is one inescapable conclusion. She admits to doing it, under oath.
I advise my business clients to be so careful about these things. Not just intend to do right, but establish well written, easy to understand employment policies that express not just that such behavior will not be tolerated, but that those who do not comply will be disciplined or terminated. That violations will be promptly investigated and decidedly dealt with. I advise them to send a message to their employees that management will protect not just their livelihood, but their dignity. They need to establish a workplace atmosphere that will remain as free from this kind of hostility as possible.
Paula Deen is accused of much more than just blithely dropping the "N" word on occasion. She is charged with fostering an atmosphere of racial discrimination against African Americans in her place of business. The context of the situation cannot be minimized. She now watches her livelihood slip away from her not because she was a bad person or "politically incorrect." She was (allegedly) a poor manager, allowing unacceptable social concepts to control the business environment under her authority.
The lesson employers and managers can take away from Paula Deen is that the lack of solid employment policy making and our own insensitivity to our employees can lead to ruin. Many of my business clients with employees want me to help them to head off employee charges and lawsuits, and then, when charges are filed, to help dispose of them or win. But Paula Deen's situation shows that there is so much more at stake than a lawsuit. She may eventually lose everything she has over this. Even before the pre-trial conference is held.
And that should make Employers and Managers pause, and ponder these concepts.
Thursday, June 6, 2013
CLIENTS NEED MORE THAN LEGAL ADVICE REGARDING CONTRACTS
It was one of the most frustrating concepts I regularly dealt with when I worked as an in-house counsel.
One of my duties was "contract review." The legal oversight of all the contractual relationships for the company where I worked. It became a daunting task. I was expected to review and approve the language in almost every contract the organization entered. With almost a dozen health care and housing sites to manage, and several subsidiary service companies, this became hugely time consuming. So I taught the managers of the company how to do a basic review of all the basic vendor contracts they entered into, and what to watch for.
But the biggest problem I often encountered -- and still do with my clients who ask me to review clients today -- is that the folks who ask me to review the contract presume that if I approve the language of a contract, then it must be alright to sign it.
But here's the rub. While a legal analysis of any contract is extremely important, it has certain limitations. There are many things a legal analysis simply does not address. An attorney, by his own experience and expertise, has certain limitations. A lawyer's review of a contract is not all inclusive. Therefore, there are certain things a client cannot assume even the most experienced attorneys can address (although some lawyers will have the experience to offer more).
For example, my review of your contract does not address the issue of common sense or good business judgment. In the decade and a half I spent as a corporate general counsel, there were numerous times where a manager was frustrated with the results of a business deal, and in working with me to try and fix the problem would say in exasperation, "but you approved this contract!" Sure I did. But I had no idea whether the business deal at the core of the contract was wise. I didn't know the other party was a weasel. I didn't know the market would change, or understood the pricing practices of that particular business sub-set, or that the equipment you bought at such a cut rate would break down. Because of my experience in certain areas, I now can certainly advise a client when I suspect a business deal isn't a good idea. But a strict "legal" analysis doesn't address this issue.
My review of your contract does not require that records or understanding must be complete. If I am not part of the negotiation that went into the contract, I won't know whether your understanding of the "deal" is actually reflected within the four corners of the document. If you don't explain that to me, I won't know to look for it.
Any attorney's analysis of a contract will involve making judgments based on established principles of equity and legality. As an attorney, I am generally not a stakeholder in the process of constructing a contract. My insight is much narrower. I focus on making sure the contract follows established legal standards, and that the rights of my client under the terms of the contract can be enforced. Some of my clients bring me closer into the inner workings of their business, but even then, there is a need for clarity regarding what my role will be and what the client expects.
A client often comes to me with a demand that I just do a "quick review" of this contract. They want the comfort of knowing their lawyer giving them a "thumbs up" on a transaction, but they don't want to pay a lot for it. "Don't spend a lot of time on this," they say. I can give them my review of the legal boilerplate, and whether the basic concepts are covered (e.g. Is the contract as a whole enforceable? Are there particular clauses that are not enforceable? Does it comply with statutory or regulatory requirements? Are there any important provisions missing? Are the termination and remedy provisions clear and unambiguous?) A lawyer experiences frustration when he or she feels that the business people are abdicating responsibility for making business judgments. On the other hand, I understand when the client feels frustrated because they feel the lawyer won't give them an opinion that is more airtight -- they expect when their lawyer says "OK" everything will truly be "Ok."
I try and make these things clear to my clients -- that they understand the scope of my review of their contracts. But more and more, clients are expecting so much more. While my 23 plus years of experience might help me to offer a more comprehensive review of a client's proposed business transaction, I cannot assure my clients that the contract they enter into will produce positive results. I can help ensure compliance, enforceability, remedy, and as painless a termination as can be negotiated. But I also must make sure my clients understand the limits of my role, and work towards being as much of a help as I possibly can.
Sometimes the best advice I can offer a client is to ask them to make sure the "deal" is everything they think it is. In the Bible, in Luke 14:28, Jesus offers this advice, “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?" Even the Lord advises us to ultimately consider common sense and good business judgment. That should be the first consideration before entering into a contract. A legal analysis won't often sniff out a bad business decision.
One of my duties was "contract review." The legal oversight of all the contractual relationships for the company where I worked. It became a daunting task. I was expected to review and approve the language in almost every contract the organization entered. With almost a dozen health care and housing sites to manage, and several subsidiary service companies, this became hugely time consuming. So I taught the managers of the company how to do a basic review of all the basic vendor contracts they entered into, and what to watch for.
But the biggest problem I often encountered -- and still do with my clients who ask me to review clients today -- is that the folks who ask me to review the contract presume that if I approve the language of a contract, then it must be alright to sign it.
But here's the rub. While a legal analysis of any contract is extremely important, it has certain limitations. There are many things a legal analysis simply does not address. An attorney, by his own experience and expertise, has certain limitations. A lawyer's review of a contract is not all inclusive. Therefore, there are certain things a client cannot assume even the most experienced attorneys can address (although some lawyers will have the experience to offer more).
For example, my review of your contract does not address the issue of common sense or good business judgment. In the decade and a half I spent as a corporate general counsel, there were numerous times where a manager was frustrated with the results of a business deal, and in working with me to try and fix the problem would say in exasperation, "but you approved this contract!" Sure I did. But I had no idea whether the business deal at the core of the contract was wise. I didn't know the other party was a weasel. I didn't know the market would change, or understood the pricing practices of that particular business sub-set, or that the equipment you bought at such a cut rate would break down. Because of my experience in certain areas, I now can certainly advise a client when I suspect a business deal isn't a good idea. But a strict "legal" analysis doesn't address this issue.
My review of your contract does not require that records or understanding must be complete. If I am not part of the negotiation that went into the contract, I won't know whether your understanding of the "deal" is actually reflected within the four corners of the document. If you don't explain that to me, I won't know to look for it.
Any attorney's analysis of a contract will involve making judgments based on established principles of equity and legality. As an attorney, I am generally not a stakeholder in the process of constructing a contract. My insight is much narrower. I focus on making sure the contract follows established legal standards, and that the rights of my client under the terms of the contract can be enforced. Some of my clients bring me closer into the inner workings of their business, but even then, there is a need for clarity regarding what my role will be and what the client expects.
A client often comes to me with a demand that I just do a "quick review" of this contract. They want the comfort of knowing their lawyer giving them a "thumbs up" on a transaction, but they don't want to pay a lot for it. "Don't spend a lot of time on this," they say. I can give them my review of the legal boilerplate, and whether the basic concepts are covered (e.g. Is the contract as a whole enforceable? Are there particular clauses that are not enforceable? Does it comply with statutory or regulatory requirements? Are there any important provisions missing? Are the termination and remedy provisions clear and unambiguous?) A lawyer experiences frustration when he or she feels that the business people are abdicating responsibility for making business judgments. On the other hand, I understand when the client feels frustrated because they feel the lawyer won't give them an opinion that is more airtight -- they expect when their lawyer says "OK" everything will truly be "Ok."
I try and make these things clear to my clients -- that they understand the scope of my review of their contracts. But more and more, clients are expecting so much more. While my 23 plus years of experience might help me to offer a more comprehensive review of a client's proposed business transaction, I cannot assure my clients that the contract they enter into will produce positive results. I can help ensure compliance, enforceability, remedy, and as painless a termination as can be negotiated. But I also must make sure my clients understand the limits of my role, and work towards being as much of a help as I possibly can.
Sometimes the best advice I can offer a client is to ask them to make sure the "deal" is everything they think it is. In the Bible, in Luke 14:28, Jesus offers this advice, “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?" Even the Lord advises us to ultimately consider common sense and good business judgment. That should be the first consideration before entering into a contract. A legal analysis won't often sniff out a bad business decision.
Friday, April 26, 2013
INDIANA BUDGET DEAL MEANS INCOME TAX CUTS AND ELIMINATION OF INHERITANCE TAX!
Big news for my Indiana clients!
Indiana Gov. Mike Pence and legislative leaders reached a budget deal Thursday that will cut the state’s personal income tax rate by 5 percent over the next four years while giving small increases to school funding.
The tax-cut plan would reduce the state’s current 3.4 percent tax rate to 3.3 percent in 2015 and then reduce that to 3.23 percent in 2017.
Pence issued a statement calling the cut “a great victory” for taxpayers even though it is half of what he proposed and is phased in over a much longer period.
Republican legislative leaders had resisted Pence’s push for a 10 percent tax cut to be fully implemented by July 2014. The House approved a budget plan in February without an income tax cut and the Senate this month had backed just a 3 percent cut.
Republican House Speaker Brian Bosma said his priorities had always been that the state’s budget be strong enough to avoid big spending cuts or the need for tax increases in the future.
“We believe this blend is the right blend, it’s at the right amount, it’s at the right time to be sustainable for the future,” Bosma said.
The Republican-dominated House and Senate are both expected to vote on the two-year budget plan on Friday, which is expected to be the final day of this year’s legislative session.
The proposed budget also calls for repealing the state’s inheritance tax retroactive to Jan. 1 of this year, which will reduce state revenue by about $150 million. Legislators last year had approved a 10-year phase out of that tax.
The spending plan gives 2 percent and 1 percent increases for school funding over the next two years, for about a $330 million hike.
Democrats have criticized the school funding increase as inadequate after former Gov. Mitch Daniels cut some $300 million from school spending during the recession.
The budget plan would also increase state funding for road and bridge projects by $215 million a year.
Pence said in his statement that the tax cuts put the state’s taxpayers first.
“The combination of a 5 percent individual income tax cut, inheritance tax repeal and additional tax relief for businesses is the right tax relief at the right time and will give a much needed boost to working families, small businesses and family farms,” Pence said.
(Taken from story published in the Louisville Courier-Journal on April 25, 2013; Written by Tom LoBianco and Tom Davies)
Indiana Gov. Mike Pence and legislative leaders reached a budget deal Thursday that will cut the state’s personal income tax rate by 5 percent over the next four years while giving small increases to school funding.
The tax-cut plan would reduce the state’s current 3.4 percent tax rate to 3.3 percent in 2015 and then reduce that to 3.23 percent in 2017.
Pence issued a statement calling the cut “a great victory” for taxpayers even though it is half of what he proposed and is phased in over a much longer period.
Republican legislative leaders had resisted Pence’s push for a 10 percent tax cut to be fully implemented by July 2014. The House approved a budget plan in February without an income tax cut and the Senate this month had backed just a 3 percent cut.
Republican House Speaker Brian Bosma said his priorities had always been that the state’s budget be strong enough to avoid big spending cuts or the need for tax increases in the future.
“We believe this blend is the right blend, it’s at the right amount, it’s at the right time to be sustainable for the future,” Bosma said.
The Republican-dominated House and Senate are both expected to vote on the two-year budget plan on Friday, which is expected to be the final day of this year’s legislative session.
The proposed budget also calls for repealing the state’s inheritance tax retroactive to Jan. 1 of this year, which will reduce state revenue by about $150 million. Legislators last year had approved a 10-year phase out of that tax.
The spending plan gives 2 percent and 1 percent increases for school funding over the next two years, for about a $330 million hike.
Democrats have criticized the school funding increase as inadequate after former Gov. Mitch Daniels cut some $300 million from school spending during the recession.
The budget plan would also increase state funding for road and bridge projects by $215 million a year.
Pence said in his statement that the tax cuts put the state’s taxpayers first.
“The combination of a 5 percent individual income tax cut, inheritance tax repeal and additional tax relief for businesses is the right tax relief at the right time and will give a much needed boost to working families, small businesses and family farms,” Pence said.
(Taken from story published in the Louisville Courier-Journal on April 25, 2013; Written by Tom LoBianco and Tom Davies)
Tuesday, April 9, 2013
New FMLA Regulations: Employers need to know!
On February 5, 2013, twenty years to the day after the Family and Medical Leave Act (FMLA) was signed into law, the U.S. Department of Labor (DOL) issued a
revised Final Rule implementing recent expansions to the FMLA, effective March 8, 2013. This Final Rule expanded FMLA protection for military
families, airline personnel and flight crews, and also requires covered employers to update their FMLA posters and
policies. In addition, the Final Rule also implements clarifying changes for the calculation of
intermittent and reduced schedule leave.
If your business has employees who have military personnel in their families, the Final Rule implements the following changes regarding Military Leave:
If your business has employees who have military personnel in their families, the Final Rule implements the following changes regarding Military Leave:
- Extends the availability of FMLA leave to family members of members of the National Guard, Reserves, and the Regular Armed Forces for qualifying exigencies arising out of the servicemembers’ deployment
- Adds a qualified exigency leave category for parental care leave, allowing an employee to take leave to care for a military member’s parent who is incapable of self-care when the care is needed due to the servicemember’s covered active duty
- Increases the amount of time an eligible family member can take for Rest and Recuperation from five days to a maximum of 15 calendar days to spend with a military member on rest and recuperation leave orders
- Extends FMLA military caregiver leave for family members of current servicemembers to include an injury or illness that existed prior to service and was aggravated in the line of duty
- Extends FMLA military caregiver leave to family members of certain veterans with serious injuries or illnesses
- Provides that periods of absence from work by qualifying military members which are due to USERRA-covered service is counted in determining an employee’s eligibility for FMLA leave
- Clarifies that an employer may not require an employee to take more leave than necessary
- Clarifies that FMLA leave may only be counted against an employee’s FMLA entitlement for leave actually taken and not for time that is worked
- Clarifies that an employer must track FMLA leave using smallest increment of time used for other forms of leave with a one hour maximum
- Clarifies that the physical impossibility exception is to be applied only in the most limited circumstances, and the employer has the responsibility to restore the employee to the same or equivalent position as soon as possible
The DOL also offers a most helpful side-by-side comparison chart to help Employers understand the changes in the Final Rule here.
Monday, April 8, 2013
Our Office has relocated . . . again!!
Yes, for those who are paying attention, John R. Russell, Ltd. wants to make it clear. Our office has relocated to the South Holland Professional Center at 15525 South Park Avenue, Suite 104, South Holland, Illinois 60473. I am sharing office space with veteran attorney Thomas Gilley, and I am looking forward to the new opportunities my new location will offer. Please come and visit.
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