EXEMPT OR NONEXEMPT?A CRITICAL QUESTION FOR EMPLOYERS
In the past few years there has been a significant increase in the number ofindividual and class action lawsuits against employers alleging a failure to payovertime as required by the Fair Labor Standards Act (“FLSA”). Recoveries in theselawsuits can be ruinousbecause they can include notonly unpaid overtime for anentire class of employees forup to three (3) years (or up tosix (6) years under some statestatutes), but also liquidateddamages equal to 100% ofthe unpaid overtime, interestand attorneys’ fees. Manyof these cases are based onthe employer’s unintentionalmisclassification of employ-ees as “exempt” from theovertime requirements.Because of the enormousstakes involved and theincreased focus on potentialFLSA recoveries, it is more important than ever for employers to be sure they properlyclassify employees as either exempt or nonexempt from overtime.
The FLSA, a federal law that was enacted in 1938, requires that all employeesbe paid one and one-half times their regular hourly rates of pay for all hours workedin excess of 40 in a single workweek. However, the FLSA also establishes severalcategories of employees who are exempt from the overtime requirements and do nothave to be paid premium pay for a longer workweek. Unless an employee’s job dutiesqualify him/her for one of these exemptions, he/she is nonexempt and mustbe paid overtime.
The following are the basic requirements for exempt status:
SALARY BASIS: Even if an employee qualifies for one of the exemptions describedbelow, he/she must be paid at least $455 per week ($23,600 annually) and must bepaid on a “salary basis” in order to be exempt. An employee paid on a salary basismust receive the same predetermined salary each workweek, regardless of the
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ABOUTKANE KESSLER...Kane Kessler is a midsized lawfirm located in MidtownManhattan, serving clientsthroughout the United Statesand globally. Kane Kesslerhas been in the business ofproviding exceptional legalservices to its clients for over80 years, with experienced andspecialized lawyers practicingin many areas of the law. AtKane Kessler, we take pridein delivering personal attentionto each and every client and inour ability to offer a wide rangeof experience and knowledgein many legal specialties tohelp your business grow andprosper.
Our Business Is You®
For more information about theFirm, please visit our websiteat www.KaneKessler.com orcall us at (212) 541-6222.
The Editors,
Judith A. Stoll
Gary E. Ostroff
KANE KESSLER, P.C.Our Business Is You® | April 2012
COOPERATIVE AND CONDOMINIUM INSURANCE: WHO PAYS FOR DAMAGES • ALERTS ON NEW REGULATIONSFAILURE TO MAINTAIN ELECTRONIC DATA COULD COST YOU • TRADEMARKING COLORS IN THE FASHION INDUSTRY
quantity and quality of work performed.However, an employermay deduct for an employee’s full-day absences (but neverpartial-day absences) for a disciplinary suspension, or personalor sick leave without losing the exemption.
If an employee passes the salary basis test, he/she must fit intoone of six (6) basic categories of exempt employees to beexempt from overtime.
EXECUTIVE: An employee is an exempt executive employeeif (1) his/her primary duty is themanagement of the enterpriseor a department of the enterprise, (2) he/she customarily andregularly directs the work of two or more other employees,and (3) he/she has the authority to hire or hire or effectivelyrecommend hiring or firing.
ADMINISTRATIVE:An employee is an exempt administra-tive employee if (1) his/her primary duty is performing officeor nonmanual work directly related to management policiesand general business operations of the employer, and (2) his/herprimary duty includes customarily exercising discretion andindependent judgment with respect to matters of significance.Administrative employees do not need to supervise otheremployees in order to be exempt.
LEARNED PROFESSIONAL: An employee is an exemptlearned professional if his/her primary duty requiresknowledge of an advanced type in a field of science or learninggenerally requiring an advanced course of study (e.g., doctor,nurse, attorney, architect).
CREATIVE PROFESSIONAL: An employee is an exemptcreative professional if his/her duties require invention,imagination, originality or talent in a recognized field of artisticor creative endeavor.
COMPUTER:An employee is an exempt computer employeeif his/her primary duty consists of the (1) application of systemsanalysis techniques or procedures; (2) design, development,documentation, analysis, creation, testing or modificationof computer systems; or (3) design, documentation, testing,creation or modification of computer programs related tomachine operating systems.
OUTSIDE SALESPERSON: An employee is an exemptoutside salesperson if his/her primary duty is “making sales” orobtaining orders and the employee is customarily and regularlyengaged away from the employer’s place of business.
Unfortunately, despite the critical importance of accuratelyclassifying employees, it is not always easy to determinewhethera particular job qualifies as exempt. Accurate classificationdepends not on the employee’s title but on his/her actual dutiesand responsibilities and requires a careful, factual analysis ofeach job. For example, an administrative assistant maybe exempt if he/she truly exercises independent judgment withrespect to matters of importance, but an administrativeassistant who merely takes direction and/or follows standardprocedures is not exempt. We strongly recommend thatemployers consult with legal counsel before classifying anemployee as exempt.
Kane Kessler has extensive experience advising employers oncompliance with the FLSA and representing employers inFLSA litigation.
Judith A. Stoll is a Partner in the Firm’s Labor andEmployment Law practice group. Judith can bereached at (212) 519-5165 or [email protected].
Attorneys representing cooperative corporations andcondominiums receive urgent calls on a regular basis frommanaging agents and unit owners demanding that damageto an apartment caused by bursting pipes inside buildingwalls or from another unit be immediately repaired by thecoop/condo, and that the building assume liability for alldamages incurred. When unit owners are told to contacttheir insurance brokers to report the loss and seek paymentfrom their insurers, the usual response is “I did not causethe damage, and I don’t want to report the loss to myinsurer and have my premiums rise.”
When unit owners are informed by building managementthat the building is not liable for the loss nor is itresponsible for the repair or restoration of wall coveringsand personal property and that recovery for damage shouldbe coming from the unit owner’s property insurance carriers,anger often overtakes frustration caused by the damage.
When water damage occurs, two basic issues arise: (1) Whois liable for the damage? and (2) Who is responsible forpaying for restitution and repair of personal property causedby the water damage?
The first advice for the party sustaining damage is topromptly notify his/her property insurance carrier to reportthe loss. Failing to so notify the insurance company mayresult in the insurance company denying a claim due tofailure to timely notify the company of the loss, arequirement under most policies.
The next step is to determine what damage the propertyinsurance policy covers. This determination is often basedupon the provisions of the coop/condo’s governingdocuments (the bylaws and proprietary lease in the caseof a coop and the bylaws and declaration in the case of a
condominium), which usually provide that the unit owneris responsible for everything inside the interior walls of theunit, including wall coverings, furniture, floors and otherimprovements. Thus the responsibility for restoring theseitems is the unit owner’s, and property insurance shouldcover these costs. When a unit owner’s insurance companypays the unit owner to repair, restore or replace damagedproperty and for improvements, the insurance companymay then step into the shoes of the insured and, if thatcarrier believes another unit owner or the building isresponsible for the damage, seek to recover amounts it paidto the unit owner from the parties responsible for thedamage and their insurance carriers.
Liability for damage is often a tricky question, since liabilityis based upon damage caused by acts of unit owners,failure of the building’s responsibility to maintain commonelements or, in the rare cause, an intentional act that causedthe damage.
Therefore, the best way for coop/condo unit owners toprotect their interests is (1) to understand what the coop/condo governing documents provide as to responsibility forrepairing damaged property and (2) to maintain appropriateinsurance coverage that covers their apartments and thecontents thereof.
Kane Kessler advises numerous coop and condo boards onissues affecting their fiduciary duties to their unit owners.
OUR BUSINESS IS YOU® 3
COOPERATIVE ANDCONDOMINIUM INSURANCE
Who Pays for Damages?
Ronald L. Nurnberg is a Partner and Bruce M. Schlossis Counsel in the Firm’s Real Estate practicegroup. Ronald can be reached at (212) 519-5127 [email protected]. Bruce can be reached at(212) 519-5197 or [email protected]
Taxpayers have approximately nine (9) months to takeadvantage of the current lifetime federal gift exemptionof $5,120,000 before it is scheduled to decrease to$1,000,000.
The current transfer tax rules governing gift and estate taxare scheduled to “sunset” on December 31, 2012. Unlessnew rules are enacted, as of January 1, 2013, the lifetimegift tax exemption and the estate tax exemption willdecrease from the current $5,120,000 to $1,000,000 andthe top estate tax bracket will increase from 35% to 55%.
The current administration has proposed new transfer taxrules to take effect on January 1, 2013, but the prospect ofsuch proposals being enacted is uncertain at this time. Theproposed changes to the transfer tax rules are as follows:
• Reduce the lifetime gift tax exemption from $5,120,000to $1,000,000
• Reduce the estate tax exemption from $5,120,000 to$3,500,000
• Increase the top federal gift and estate tax bracket from35% to 55%
• Eliminate valuation discounts for intrafamily transfers,thus making discounts for minority interest and lack ofmarketability unavailable
• Require that the term of grantor retained annuity trustsbe a minimum of 10 years
• Eliminate perpetual dynasty trusts
• Eliminate the estate planning benefits of the grantortrust rules
If you have any questions or wish to discuss taxes and estateplanning matters, please contact Michael Zimmerman,Esq., Counsel to the Firm in the Tax and Estate practicegroup. Michael can be reached at (212) 519-5137 [email protected]
ALERTS
The National Labor Relations Board (“NLRB”) issued arule requiring all private sector employers who are coveredby the National Labor Relations Act (“NLRA”) (i.e.businesses with revenue of more than $500,000 annually orengage in interstate commerce of more than $50,000), topost a notice in conspicuous places where other similarnotices are posted. The purpose of the notice is to adviseemployees of their rights to organize and bargain collectivelythrough unions under the NLRA, or to refrain from sodoing, will provide examples of unlawful employer andunion conduct, and will give contact information for theNLRB.
However, because of legal challenges to the postingrequirement, the original posting deadline of November 14,2011 was delayed by the NLRB until January 31, 2012 andthen delayed again until April 30, 2012. Recently, the U.S.District Court in South Carolina issued a decision strikingdown the NLRB’s authority to issue the notice posting ruleand finding the rule invalid. On April 17, 2012, the D.C.Circuit Court of Appeals issued an injunction, staying theimplementation of the posting rule and ordering a hearing
for September 2012 on whether the NLRB has authority topromulgate the rule. We will provide further updates onthe Firm’s website and in memoranda to clients when theD.C. Circuit issues its decision.
When and if the notice becomes effective, it will have to beposted not only in conspicuous places in the workplace, butalso on internet or intranet sites if personnel rules arenormally posted in that manner. Failure to post the noticewill be considered an unfair labor practice. The notice willalso have to be posted in English and other languages if 20%or more of the workforce speak that language. The noticeand translations of the notice are currently available via linkto the NLRB website, http://www.nlrb.gov (click on“Employee Rights Poster”).
If you have any questions, please contact David R.Rothfeld, Esq. or Judith A. Stoll, Esq., partners inthe Firm’s Labor & Employment practice group.David can be reached at (212) 519-5154 [email protected], and Judith can be reached at(212) 519-5165 or [email protected].
New NLRB Posting Requirement Enjoined by Court
Estate Planning and Proposed Changes to the Federal Estate and Gift Tax Laws
FAILURETO PROPERLY MAINTAIN E-MAILS AND OTHERELECTRONIC DATA COULD COST YOU MONEY
Attorneys in the Litigation department at Kane Kesslerreceived a favorable decision from the Supreme Court,New York County, helping shape the law in New York stateregarding the costs that a party to a litigation may bearwhen searching for and producing e-mails and otherelectronic data.
In Silverman v. Shaoul, 30 Misc.3d. 491, 913 N.Y.S.2d 870(N.Y. Co. Sup Ct., 2010), Kane Kessler representedplaintiffs who had purchased a newly constructed,multimillion-dollar condo-minium unit in Manhattan.Immediately after closing,water began leaking intothe apartment every time itrained. After several months,the apartment was renderedcompletely uninhabitable dueto mold caused by the water infiltration. Kane Kesslercommenced a lawsuit against the sponsor/developer in theSupreme Court of the State of New York, New YorkCounty, alleging breach of contract and negligence in thedesign and construction of the building.
During discovery, our attorneys served a documentdemand seeking all of the defendant’s e-mails and otherelectronic data pertaining to the lawsuit.
NEGLIGENT MAINTENANCE OF DATA INSUFFICIENT
TO WARRANT COST SHIFTING
In addition to the building at issue in our case, thedefendant was also engaged in developing and constructingnumerous other projects throughout Manhattan but failedto maintain its e-mail accounts and other electronic filesin a manner that allowed it to distinguish easily betweenthe various projects. As a result, defendant claimed it was
required to hire an outside vendor to cull through thethousands of e-mails and other electronic files to gatherand produce the information – at a cost of almost $70,000.
In its motion to the court seeking to have those costs bornebyKaneKessler’s client, defendant argued that the informationsought was “dispersed throughout several repositories,” and,therefore the plaintiffs’ request was unreasonable and bur-densome.The court, however, rejected defendant’s argument,holding that a company’s failure to properlymaintain electronic
data in an organized orotherwise nonnegligentmanner precludes that partyfrom passing the costs forthe production of thosematerials onto the other side.
ELECTRONIC INFORMATION MUST BE PRESERVED IN
AN ORGANIZED, EASILY RETRIEVABLE MANNER
Every business operating in today’s world must be aware thatif it becomes involved in litigation, the discovery processwill require it to produce e-mails and other electronicdocuments and data. Since the cost of searching for, reviewingand producing electronic materials is extremely expensive, itis imperative that all businesses maintain their electronic datain an organized and easily retrievable fashion. If not, they willlikely have to suffer the time, distraction and costs, includingin many instances paying exorbitant fees to third-partyvendors, to produce the files.
“... a company’s failure to properly maintainelectronic data in an organized or otherwisenonnegligent manner precludes that partyfrom passing the costs for the production of
those materials onto the other side.”
Arthur M. Rosenberg is a Partner and GerardSchiano-Strain is an Associate in the Firm’s Litigationpractice group. Arthur can be reached at (212) 519-5147or [email protected] and Gerard can bereached at (212) 519-5164 or [email protected].
Colors have long been capable ofacting as trademarks. Some well-knownexamples of color trademarks areTiffany’s robin’s egg blue, UPS’s brownand John Deere’s green. All these colorsare well-known as identifying the sourceof the goods and services of the markowners, just as the Nike swoosh andCoca-Cola identify the sources ofproducts. In fact, the United StatesSupreme, in Qualitex Co. v. JacobsonProducts Co., Inc., 514 U.S. 159 (1995),recognized that color can function as atrademark if it has acquired “secondarymeaning” (in other words, the consumingpublic recognizes thecolor as an indicatorof the source ofparticular goods).So it is clear thatsingle colors can actas trademarks, right?
No – at least not inthe fashion industry,according to a recent federal districtcourt ruling.
In Christian Louboutin S.A. et al v. YvesSaint Laurent America, Inc. et al, 778 F.Supp. 2d 445 (S.D.N.Y. 2011), UnitedStates District Court Judge VictorMarrero of the Southern District ofNew York recently denied Louboutin’srequest for a preliminary injunctionprohibiting YSL from selling itsmonochromatic red women’s shoes.Although Louboutin has adorned hiswomen’s high-fashion footwear styles
with “Louboutin red” outsoles for thepast 20 years, and although the U.S.Trademark Office in 2008 grantedLouboutin a federal trademark registra-tion for a “lacquered red sole” used inconnection with “women’s high-fashiondesigner footwear,” Judge Marreroheld that the red-soled mark ofLouboutin was not likely to beentitled to trademark protection andYSL did not have to stop selling its redshoes (at least during the pendency ofthe case).
While Judge Marrero acknowledgedthat the redoutsole isclosely associ-ated withL o u b o u t i n(and thus thatthe red soleshad acquired“s e conda r ymeaning”), he
nonetheless held that in the fashionindustry – as in the art world – colorsare “aesthetically functional” and toenjoin YSL from selling red-soled shoesessentially would deprive fashiondesigners of the tools of their trade.Judge Marrero painted a grim picturewhere color is usurped by a singlesource, finding that “[p]lacing off-limitsigns on any given chromatic bandby allowing one artist or designer toappropriate an entire shade and hang anambiguous, threatening cloud over a
“... in the fashion industry – as inthe art world – colors are ‘aestheticallyfunctional’ and to enjoin YSL fromselling red-soled shoes essentiallywould deprive fashion designers ofthe tools of their trade.”
6 KANE KESSLER, P.C.
KANE KESSLER, P.C.1350 Avenue of the Americas
New York, NY 10019(212) 541-6222
www.kanekessler.com_____________________
The information contained in thisNewsletter is of a general nature and does
not constitute legal advice. Under the rulesof certain jurisdictions, this material may be
considered attorney advertising. Consultationwith our attorneys is recommended before
taking any action based upon any of thisinformation. To comply with the requirements
imposed by the IRS and Treasury Departmentrules governing tax practice, we inform you that
any advice contained herein is not intended orwritten to be used and cannot be used by a taxpayer
to (i) avoid tax penalties; or (ii) promote, marketor recommend to another person any transaction
or matter addressed herein. You are receiving thisnewsletter because you are or have been a client or
friend of our Firm.
OUR BUSINESS IS YOU® 7
IN THE FASHION INDUSTRY?
swath of other neighboring hues … would unduly hinder not just commerce andcompetition but art as well.”
The Louboutin decision is currently on appeal to the Court of Appeals for the SecondCircuit. The case has been argued and a decision is pending. Many industry players,including Tiffany & Company, the International Trademark Association and legalscholars have filed amici (friend of the court) briefs attempting to sway the decisionone way or the other. The relevance of the decision, of course, is that if color canfunction as a trademark, the owner of the color trademark could exclude all othersfrom using the color in connection with the specified goods and services.
Although the Louboutin decision is understandably disconcerting to brandowners that have expended significant time, effort and resources indeveloping color trademarks, all is not lost even assuming affirmance of thedistrict court Louboutin opinion. First, the decision very likely wouldnot apply to industries other than fashion where color is used “primarilyto advance expressive, ornamental and aesthetic purposes.” Second, evenwithin the fashion industry, Judge Marrero acknowledged that colorsmay be protectable as trademarks for fashion items where the color ispart of a “distinct pattern or combination of shades” as opposed toa single, specific color. Third, Louboutin may have made an errorin how broadly it characterized its mark; its registered trademarkwas characterized as “a lacquered red sole on footwear.” If themark had been more narrowly characterized, for instance as “alacquered sole on footwear in the color ‘Chinese red,’ PantoneNo. 18-1663 TP,” the outcome may have been different.Meanwhile, the fashion industry holds its breath to seewhether the Second Circuit will join Judge Marrero and givethe boot to Louboutin’s appeal or whether it will reverseand find that the Louboutin red soles are protectable.
Kane Kessler’s Intellectual Property practice grouphas extensive experience in Trademark registration andlitigation.
Adam M. Cohen is a Partner of the Firm andChair of the Intellectual Property practice group.Adam can be reached at (212) 519-5146 [email protected]
Adam Cohen, Chair of the IP Group, will be a paneliston the “Trademark Troll” panel at the annual meeting ofthe International Trademark Association to be held inWashington, D.C., in May.
ACHIEVEMENTS
David R. Rothfeld, a Partner of the Firm and Chair of theLabor andEmployment practice group,was the lead negotiatoron behalf of the Hotel Association of New York City, Inc.,during contract talkswith theNewYorkHotel&MotelTradesCouncil, AFL-CIO.Thenegotiations resulted in the successfulsettlement of a new seven-year collective bargaining agreement.The collective bargaining agreement covers approximately30,000 employees working in more than 150 hotels in theNew York metropolitan area.
The Firm’s Corporate and Securities practice groupsuccessfully represented:• A NASDAQ-listed company in its successful publicoffering with a national underwriter of 8,912,500 sharesof its common stock (including the exercise in full of theunderwriters’ over-allotment option shares) with netproceeds to the company, after underwriters’ discounts, ofapproximately $63.4 million
• ANYSEpublicly traded company complete a $300millionfacilities increase under an existing senior credit facility
• A NYSE publicly traded company in the successfulcompletion of a Dutch tender offer to purchase up to$500 million of its own common stock
• A partner of multibillion dollar investment managementorganization in the withdrawal of his partnership interestfrom the fund
• A strategic partner in his acquisition of amulti-tiered equityinterest in a national title insurance company
• A group of equity funds restructure their operatingagreements to address capital contribution deficiencies
The Firm’s General Business practice group successfullyrepresented:• A restaurant group in its private placement of equity,commercial debt financing, lease negotiation andcommercial matters in connection with its funding andopening of its newest restaurant in South Florida
• Amulticoncept restaurant groupwith respect to its raising ofventure capital equity, related venture financing, and relatedstructuringandleasenegotiationinconnectionwiththe launchof its first fast-casual restaurant concept inNewYorkCity
The Firm’s Labor and Employment Law practice groupwas also successful in obtaining:• Dismissal of a complaint filed in New York State SupremeCourt, New York County, alleging retaliation for allegedwhistle-blowing in violation of Section 740 of theNewYorkLaborLawand intentional inflictionof emotionaldistress, onthegrounds that the complaint failed to state a causeof action
• Dismissal of a complaint filed in New York SupremeCourt, Queens County, of a race and national origindiscrimination and retaliation case under New York Stateand New York City laws, on the grounds that thecomplaint was barred by the doctrine of res judicata
• Dismissal of a New Hampshire state court lawsuit against abillion-dollar specialty risk insurancecompanyanditsaffiliates,in which plaintiff alleged that the clients engaged in fraud,breachof contract, damage to business reputation, unfair anddeceptive practices, unjust enrichment and promissory fraud
• A reversal on appeal to the First Department, reinstating aclaim formisappropriation of confidential information thathad been dismissed by the lower court
TheFirm’sReal Estate practice group successfully represented:• A high-end retail tenant in connectionwith lease negotiationsand build-out of its flagship store onMadison Avenue
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