Category: Uncategorized

By Christine Malafi

During the course of any given week, I encounter numerous volunteers at the Town programs in which my two sons participate. Sometimes, work schedule permitting, I am even one of those volunteers. Given current budget constraints, volunteers are needed to keep some municipal programs operating. As with private employers, however, sometimes a “public” volunteer is really an employee. Towns and Villages need to be careful to avoid adverse findings by the Federal and New York State Departments of Labor.

The Federal Fair Labor Standards Act (“FLSA”) requires both public and private entity employees to be paid minimum and overtime wages. The question of who qualifies as an “employee” under the FLSA is not as simple as you would expect. For public agencies, the State, and its subdivisions, there is an express exception in the FLSA to allow volunteer to perform public services without entitlement to wages. A public “volunteer” includes people who: (1) perform services for “civic, charitable, or humanitarian reasons, without promise, expectation or receipt of compensation;” (2) are not already providing similar services as an employee of the same public entity; (3) are not promised and do not expect to receive compensation; and (4) perform work without direct or indirect pressure or coercion. Additionally, a municipality may pay “expenses, reasonable benefits, or nominal fees” to a volunteer without risking the creation of an employment situation.

The determination as to whether a person is a volunteer under the FLSA is very fact specific and the totality of the circumstances will be closely examined. On June 18, 2014, the Second Circuit Court of Appeals addressed the issue for the first time, in Brown v. New York City Department of Education, finding that a young man who provided needed services for  40 hours a week over three years at a New York City high school was a public volunteer under the FLSA and not entitled to wages. Brown had begun “working” at the school to help his brother, who was an employee, because he was unable to find employment and wanted to build his resume, become a better person, and help students. He was, apparently, a very good worker, and both the school principal and his brother gave him token amounts of money, bought him lunch, and paid for his Metro Card over the years. He repeatedly requested a paid position, and was told that he did not have sufficient higher education to qualify for a paid position and that there was no money in the budget for another position. He was asked not to return to the school after a female student lodged a complaint against him (the specifics of which were not provided by the Court). Upon his “termination,” he sued for back wages.

In affirming the District Court’s dismissal of his action, the Second Circuit held that:

1. A person does not have to be solely motivated by civic, charitable, or humanitarian purposes to be considered a public volunteer (to build one’s resume is an acceptable purpose);
2. Whether or not a person expected compensation for their work is subject to an objective reasonableness standard; and
3. The court should look at the “economic realities” and other relevant factors of the situation to determine whether compensation could have been expected.

The Second Circuit Court acknowledged that the public volunteer exception is unique, and specifically noted that private sector employers have a more difficult time establishing that a volunteer is not an employee entitled to wages.

It is important that the FLSA not be construed in such a way so as to discourage volunteerism, and public agencies and municipalities should not be discouraged from accepting help from volunteers. The Second Circuit decision in Brown certainly encourages public entities and municipalities to accept volunteers without threat of liability for wages.

Some people believe that effective negotiators are born, not made, but this presentation will prove them wrong.  Join Joe Campolo as he shares the alternative negotiation strategies he relies on as a law firm managing partner and business owner to solve problems and get deals done.  The CLE course will take place on Tuesday, June 28 at the Hofstra University Club, 225 Hofstra Boulevard in Hempstead, from 8:30 a.m. to 10:10 a.m. (registration from 8:00 a.m.).  The seminar has been approved for both newly admitted and experienced attorneys for 2 New York CLE credits (1.5 Skills, 0.5 Ethics).  This course is free but registration is required.  To register, please email events@ultimateabstract.com.  Learn more.

Please join us on Wednesday, June 29 for a complimentary CLE on Secured Transactions presented by managing partner Joe Campolo.  This survey on the ins and outs of security interests will cover attachment, perfection, default, remedies, and tips for drafting security agreements.  Attendees will receive crucial guidance on the role of Article 9 of the Uniform Commercial Code in corporate transactions.

The course has been approved for 2.0 CLE credits (1.5 Professional Practice, 0.5 Skills) and is appropriate for both newly admitted and experienced attorneys.

Wednesday, June 29, 2016
8:30 a.m. – 10:30 a.m.

Campolo, Middleton & McCormick, LLP
4175 Veterans Memorial Highway, Suite 400
Ronkonkoma, NY 11779

This course is free but registration is required.  Please RSVP to Lauren Kanter-Lawrence, Esq., Director of Communications, at Lkanter@cmmllp.com or (631) 738-9100, ext. 322.

One of the fundamental issues that must be analyzed before commencing a lawsuit is whether you can obtain personal jurisdiction over the individual or entity you intend to sue.

When all of the parties reside or do business in the same state, or better yet the same county, personal jurisdiction becomes an afterthought. However, when the defendants reside and/or do business outside of New York, the question of whether you can obtain personal jurisdiction becomes critical. A recent decision in the Commercial Division, Suffolk County analyzed the key factors in determining whether personal jurisdiction exists and presents a cautionary tale for plaintiffs to consider when deciding on litigation against out-of-state defendants.

In Larsen v. Virtual Tech., Inc., 2014 NY Slip.Op. 50017(U) (Emerson, J.), the plaintiff, a New York resident, commenced a lawsuit against Virtual Technologies, Inc. (“Virtual”), a Delaware corporation whose principal place of business was in California. Plaintiff sought to recover $50,000 she loaned to Virtual based upon a default by Virtual under a promissory note. There was no dispute that the promissory note indicated that it was governed by the laws of the State of California and that it was executed in California. Virtual moved to dismiss the complaint on the basis that the court did not have personal jurisdiction over it under New York’s long-arm statute (CPLR 302(a)).

As noted by Justice Emerson in her decision in Larsen, CPLR 302(a)(1) allows New York courts to obtain personal jurisdiction over a non-domiciliary (out-of-state party) who transacts any business within the state if the plaintiff’s claim arises from the transaction of such business (citing Opticare Corp. v. Castillo, 25 A.D.3d 238, 243 (2d Dep’t 2005)). It is necessary to establish that the defendant’s activities within New York are purposeful and that there is a substantial relationship between the transaction of business and the claim asserted by plaintiff. Id.

Courts look at a variety of factors to determine whether an out-of-state defendant has actually “transacted” business in New York including, but not limited to: (i) whether the defendant has an on-going contractual relationship with a New York plaintiff; (ii) whether the contract at issue was negotiated or executed in New York and whether, after executing the contract, the defendant visited New York for the purpose of meeting the parties to the contract regarding the relationship; (iii) the choice-of-law clause in the contract; (iv) whether the contract required the defendant to send notices and payments into the forum state or subjected them to supervision by a corporation in the forum state. Patel v. Patel, 497 F.Supp 2d 419, 428 (E.D.N.Y. 2007).

In the Larsen case, even though plaintiff had an ongoing relationship with Virtual (and the subsequent entity Virtual formed), the Court noted that the promissory note at issue was only negotiated by telephone and mail and the defendants never actually came to New York either during the negotiation of the promissory note or after the note was executed to meet with the plaintiff. Also, the defendant never sent any payments under the note to New York and correspondence with the plaintiff was limited to a few letters and e-mails. Based on these facts and circumstances, coupled with the fact that the note was governed by the laws of the State of California, Justice Emerson held that the defendants’ contacts with New York were insufficient to establish that the defendants “intended to project themselves into ongoing New York commerce or that they purposefully availed themselves of the New York forum.”

Plaintiff also attempted to argue that the defendant transacted business in New York because it sold products in New York through its distributor and by selling products directly to national chain restaurants such as Dave and Busters and Chuck E. Cheese. However, the Court noted that there needed to be a substantial nexus between the business transacted and the cause of action sued upon. Because plaintiff’s claim did not arise from the defendants’ sale of products in New York, the Court found that there was no nexus between the business transacted in New York and the plaintiff’s claim. As a result, the defendants’ motion was granted and the case was dismissed due to lack of jurisdiction.

The Larsen case provides an important lesson for potential litigants who are dealing with potential out-of-state defendants. It is critical under such circumstances to review all of the party’s relevant New York contacts and the factors noted above before commencing litigation to ensure that jurisdiction over that party can be obtained.

By: Bernadette Starzee, Long Island Business News

Businesses involved in the sale of a particular product or service will, of course, employ salespeople to sell those products or services. In nearly all cases, sales representatives are paid some form of monetary commission based on their level of sales using some set of variables (i.e. percentage of each sale; percentage of each new contract; total number of sales, etc.).

While determining how a commission is calculated may be simple, figuring out when the commission is “earned” for purposes of it being a payable wage can sometimes be difficult in the absence of a written agreement or policy. A recent decision in the Commercial Division, New York County dealt with precisely this issue.

In Linder v. Innovative Commercial Systems LLC, 2013 NY Slip.Op. 51695(U) (Bransten, J.), Plaintiff Gary Linder (“Linder”) commenced a lawsuit against his former employer, Innovative Commercial Systems LLC (“ICS”), to recover sales commissions he believed he was owed after he was terminated. ICS is in the business of installing and maintaining residential and commercial security systems. As a salesperson, Linder was paid commissions based upon each new contract he procured for ICS, with a varying percentage based on whether it was an installation or maintenance contract. However, the actual commission payment was not made to Linder at the time the contract was procured, but instead when the customer paid the ICS invoices under that contract. This practice continued for a number of years and ICS would regularly provide Linder with all documentation regarding the account receivables and copies of checks when customers would make payments. Linder even assisted in collection efforts to obtain payments from delinquent customers on his accounts. As collection attempts on delinquent accounts continued to come up short, so too did Linder’s sales totals and, in 2009, he was fired.

After his termination, Linder commenced the lawsuit against ICS asserting numerous claims including breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment, and New York Labor Law violations – all relating to an alleged failure by ICS to pay him sales commissions after he was terminated. Both parties ultimately moved for summary judgment.

According to Linder, he “earned” his full sales commissions at the time each contract was procured and thus, he should have received what he was “owed” in commissions even after his termination. Indeed, Justice Bransten, citing Yudell v. Ann Israel & Assocs., Inc., 248 A.D.3d 189, 190 (1st Dep’t 1998), acknowledged that New York courts have held that once a commission is “earned,” it becomes a wage that cannot be forfeited and termination would not affect the employee’s right to receive that commission. Linder also pointed to the fact that there was no written agreement between the parties regarding the commissions, so the commission was earned “upon the employee’s production of a ready, willing and able purchaser of the services” (quoting Pachter v. Bernard Hodes Group, Inc., 10 N.Y.3d 609 (2008)).

However, ICS argued that Linder only “earned” his commissions when payments were made by customers and, as such, he would not be owed anything post-termination. The Court agreed. Citing to the same Court of Appeals decision in Pachter, Justice Bransten noted that the Court there had found that the absence of a written agreement was not determinative. In fact, the Court in Pachter held that when there is no written agreement, the commission is “earned” based on the parties’ express or implied agreement, and when there is an extensive course of dealings over a number of years, an implied contract is created regarding when a commission is “earned” and becomes a wage.

Justice Bransten, in granting summary judgment in favor of ICS and dismissing Linder’s complaint, held that based on the parties’ decade-long course of dealing which documented how commissions were calculated and the history of ICS only paying commissions to Linder upon payment from customers, there was an implied agreement as to the commission structure and ICS complied with its obligations regarding payment of commissions through the time Linder was eventually terminated.

The Linder case presents an important issue that should be reviewed by all employers if their business is one in which they are paying out sales commissions to employees. Having a written, agreed upon procedure or policy laying out how and when commissions are earned, and following through with that procedure or policy, is vital to avoid problems such as the one presented in this case.

While employers are not obligated to issue severance payments (unless they have specifically agreed to do so in a written employment or other agreement), many do offer severance to terminated employees to shield themselves from potential litigation or as a courtesy for the employee’s years of service. But there have been recent changes to the New York unemployment insurance law that all New York employers should be aware of before offering a severance package to a departing employee.

Most notably, the change in the law prevents employers from ignoring unemployment insurance notices as part of an agreement with a former employee to not contest unemployment. Effective Oct. 1, 2013, employers are required to respond to certain New York Department of Labor (NYDOL) unemployment insurance correspondence within specified periods of time or they will face penalties for late responses to request for information. Previously, employers could ignore and disregard correspondence from the NYDOL if, for instance, they agreed, in a severance agreement with a particular employee, not to contest unemployment insurance. The employer’s response to a request for information must contain adequate information for the DOL to make a correct determination regarding benefit eligibility in the New York Unemployment Insurance Fund.

If an employer fails to submit a timely and/or adequate response, the employer’s unemployment insurance account will be charged for the benefits paid to the employee, even if the employee is overpaid, and even if he or she would have otherwise been deemed ineligible for unemployment benefits.

Employers need to be diligent in responding to inquiries from the NYDOL or risk being charged for unemployment insurance benefits to an individual who is ineligible or not entitled to those benefits. Moreover, although it is not recommended to agree to not contest unemployment, employers who choose to do so are cautioned to include in a severance agreement that nothing in the agreement can interfere with the employer’s obligation to respond adequately and truthfully to inquiries from the NYDOL.

Additionally under the new law, an individual cannot obtain unemployment insurance benefits during any week in which his or her severance pay exceeds the maximum weekly unemployment benefit rate – currently $405 and increasing to $420 in October 2014. Ineligibility for unemployment insurance benefits will continue for each week in which the weekly severance payment exceeds the maximum weekly unemployment benefit rate. In the event the employer structures the severance payment as a lump sum, the New York State Department of Labor will employ a formula (using the former employee’s prior actual or average weekly pay) to determine the number of weeks of ineligibility for unemployment insurance benefits.

The new disqualification provision only applies to applications for unemployment benefits filed after January 1, 2014, and not to previously filed claims. New York employers should keep these new unemployment disqualification provisions in mind when designing separation packages and communicating with former employees.

The timing of severance payments, in particular, is a crucial consideration. If the employer wants to enable the former employee to receive unemployment benefits immediately after his or her termination date, then the employer may wish to commence severance payments 31 days after the employee’s termination date.

Also, effective January 1, 2014, the reform increases employers’ assessments and contributions based on the Federal Unemployment Tax Act (FUTA). Previously, the FUTA tax was assessed on the first $8,500 of each employee’s earnings. As of the new year, employers’ taxes and contributions are assessed on the first $10,300 of each employee’s earning and will increase annually thereafter until 2026.