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Herten, Burstein, Sheridan, Cevasco,
Bottinelli, Litt, Toskos & Harz, LLC
REPORT FROM COUNSEL
SUMMER 2004 ISSUE
INSIGHTS & DEVELOPMENTS IN THE LAW
SUMMER 2004 ISSUE
NEWS FROM HERTENBURSTEIN.COM
Congratulations
- To our former partner Bergen County Prosecutor
John Molinelli who following in
the footsteps of Phil Sheridan and Terry Bottinelli was sworn in
as the 106th
President of the Bergen County Bar Association.
- To Phil Sheridan who on June 9, at the annual
dinner of the Notre Dame Club of North Jersey will receive the
Notre Dame Club Award of the Year in recognition of his
outstanding service to the University.
- To Al Burstein on his nomination by Governor
McGreevey to become a member of the State of New Jersey Election
Law Enforcement Commission.
- To Terry Bottinelli on his recent appointment
as Municipal Court Judge for the
Borough of Closter.
- To Phil Sheridan on the birth of his first
grandchild Aidan.
- To Arnold Litt on the marriage of his daughter
Alison.
- To Steve Harz on the admission of his daughter
Stephanie to Vanderbilt
University.
- To our employee Lisa Bottinelli on her
graduation from Ramapo College.
- To Jason Shafron on his appointment as a
Commissioner of the Northwest Bergen County Utilities Authority.
- To Manny Toskos for chairing the popular Bergen
County Bar Association Land
Use Symposium attended by over 150 land use board members and
local government officials.
- To Tom and Kathy Herten on celebrating their
35th wedding anniversary touring Tuscany and Northern Italy.
Herten Burstein attorneys and staff, led by Terry
Bottinelli, Arnold Litt and Jason Shafron assisted a number of
families victimized in the World Trade Center disaster in processing
claims to the September 11th Victims Compensation Fund.
Arnold Litt, Manny Toskos and Sue Marra have
joined with other regional attorneys inaugurating the Hudson Bergen
Transactional Inns. This group meets monthly to discuss issues and
concerns in the commercial law practice area.
Andy Cevasco recently completed a trial before the
Honorable Marguerite Simon in the Chancery Division, Bergen County.
Andy was successful in obtaining a favorable verdict in this
multi-million dollar will construction litigation.
ROUGH DAY AT THE GOLF TOURNAMENT
More than most athletic endeavors, golf is known
for being a setting for the
mixture of business and pleasure. Many business relationships have
been formed or strengthened, and many deals have been closed,
somewhere between the first tee and the eighteenth green. That
aspect of the game played a part in a recent court decision in which
an employee was held to be entitled to workers' compensation
benefits based on injuries he sustained while taking part in a golf
tournament.
Kenneth worked as a shipping supervisor for a
furniture manufacturer. A trucking company invited Kenneth and some
other managers to play in its annual golf tournament, free of
charge. Participation was voluntary, but you do not need to twist a
golfer's arm to get him to play golf on what otherwise would have
been a regular workday. Unfortunately, the fun stopped abruptly for
Kenneth when the golf cart in which he was riding struck a tree and
he was injured.
When Kenneth tried to get workers' compensation
benefits, his employer
challenged his claim. Its argument was that Kenneth was taking part
in a
voluntary recreational activity that made him ineligible for
benefits. There is
such an exclusion in the law, but it did not apply to bar Kenneth's
claim. The
golf tournament was voluntary, but it was not "recreational," in the
sense of
being unrelated to Kenneth's employment. Under the "mutual benefit
doctrine," even an activity that is generally regarded as
recreational will fall within the workers' compensation laws if some
advantage to the employer results from the employee's conduct.
Kenneth's participation in the golf tournament was
at least equal parts business and pleasure. His employer benefited
because Kenneth was able to meet with and establish better
relationships with the trucking company representatives whom he had
previously only talked with by telephone.
FAMILY AND MEDICAL LEAVE ACT UPDATE
Margaret worked in a clerical position for a
hospital. During the first three years of her employment, she was
disciplined several times for unexcused absences, and she risked
termination if her absenteeism continued. Then, Margaret slipped and
fell while at work, fracturing her elbow and ankle and aggravating
an existing wrist condition. Over the next 10-day period, she worked
only one complete workday. Margaret missed parts of the remaining
workdays because she had medical appointments, or was not feeling
well, or both.
The hospital, seeing these absences as the straw
that broke the camel's back, fired Margaret for excessive
absenteeism. Margaret sued her ex-employer, contending that her
absences after her fall were protected leave under the federal
Family and Medical Leave Act (FMLA). A federal court ruled that the
hospital was free to fire Margaret without running afoul of the FMLA.
The outcome in Margaret's case turned on a fine
distinction about language in
the FMLA and a regulation issued under it. The FMLA provides that an
eligible
employee can take up to 12 workweeks of leave during any 12-month
period because of a "serious health condition" that makes the
employee unable to perform the functions of the employee's job.
After taking such leave, an employee must be reinstated to the
position held before the leave. Part of the statute's definition of
"serious health condition" is a condition that involves "continuing
treatment by a health care provider." That phrase is not defined in
the FMLA itself, but a Department of Labor regulation describes it
as including "a period of incapacity . . . of more than three
consecutive calendar days." Incapacity refers to the inability to
work or perform other regular daily activities.
Margaret argued to no avail that she had been
incapacitated for more than three consecutive calendar days, and
that she therefore had taken only protected leave for a "serious
health condition." The problem was that she missed work for only a
part of all but one of the days in question. The court reasoned that
a "calendar day" is commonly understood to mean a whole day, from
midnight to midnight. Thus, to be afforded protection under the FMLA,
the period of incapacity must last for more than 3 whole days, that
is, 72 consecutive hours. In addition to parsing the language from
the regulation, the court ruled that the incapacity either extends
for over 72 straight hours, or it does not. By contrast, under the
interpretation argued for by Margaret, more issues would arise about
how much incapacity on a given day is enough for that day to count
toward the requirement in the regulation. The court was "loathe to
adopt a strained interpretation of a regulatory provision that would
result in employers, employees, and courts facing an uncertain and
ever-shifting legal landscape."
DEVELOPMENT DITCHED
Developers bought 12 acres in a hilly, rural area,
with plans to build homes on
the property. Because surface water pooled on a large central part
of the land after heavy rains, the owners channeled the excess water
into a roadside ditch.
The roadside ditch was connected to a series of
waterways that eventually reached a river eight miles away. The
developers' plan hit a major snag when they were sued by the United
States Army Corps of Engineers. The Corps contended that the
roadside ditch was a waterway of the United States that fell under
the protection of the Clean Water Act and the jurisdiction of the
Corps. With that premise, the developers first needed a permit from
the Corps before digging the drainage ditch on their property.
While the Corps exercises no control over isolated
wetlands, it has jurisdiction
over wetlands that are adjacent to navigable waters and their
tributaries. In particular, the Clean Water Act requires a permit
from the Corps for the discharge of fill material into waters that
are in the Corps' jurisdiction. When the contractors piled the
excavated dirt on each side of the 1,100 foot-long drainage ditch,
this constituted the "discharge" of fill material into wetlands
without a permit.
A federal court took the side of the Corps in
holding that a permit was required. First, the court deferred to the
Corps' interpretation of the regulation under which the tract to be
developed was regarded as having wetlands. Second, the adjacent
roadside ditch was a tributary of navigable waters, even though
water from the ditch flowed through several other nonnavigable
watercourses before reaching the river and later the Chesapeake Bay.
The court accepted the Corps' interpretation of "tributary" as
encompassing all of the streams whose water eventually flows into
navigable waters.
The court required the developers to fill in the
drainage ditch on their property and restore their wetlands to their
pre-violation condition. It rejected the developers' argument that a
more reasonable remedy would have been to allow the ditch to stay by
removing the fill to a nonwetlands part of the property.
Developers are well advised to carefully evaluate
whether any existing ditches
or drainage swales are linked to navigable water, however
indirectly, before dredging or filling what might appear to be an
isolated wetland beyond the jurisdiction of the United States Army
Corps of Engineers.
MEDICAID AND NURSING HOME BENEFITS
Medicaid is a governmental program that provides
health insurance coverage for low-income children, seniors, and
people with disabilities. As the baby boomers age, Medicaid's other
role, as a source of nursing home benefits, is getting more
attention. Each of the states operates its own Medicaid program,
subject to some overriding rules set up by Congress and the federal
Centers for Medicare and Medicaid Services. The following is an
overview of some of those rules. Be aware that the specific
requirements can vary from state to state, and must be checked
before making decisions.
Asset Rules
An individual may have no more than $2,000 in
"countable" assets to be eligible for Medicaid nursing home
benefits. Assets that are not counted in this calculation include
personal possessions, one motor vehicle (valued up to $4,500 for an
unmarried recipient and of any value for the resident's spouse), a
principal residence in the same state where benefits are sought,
prepaid funeral plans and a small amount of life insurance, and
assets deemed to be inaccessible. To promote the independence of the
nursing home resident's healthy spouse, usually referred to as the
"community" spouse, that spouse may keep one-half of the couple's
countable assets, up to a maximum of $92,760 in 2004. The least that
a state may allow the community spouse to retain in 2004 is $18,552.
The couple's assets are totaled as of a "snapshot date," which is
when a spouse enters a long-term facility in which he or she then
stays for at least 30 days.
Transfer Penalty
To avoid giving benefits to those who present a
false picture of poverty, there is a transfer penalty that is
imposed when people transfer assets without receiving fair value in
return. The Government divides the amount so transferred by the
average monthly cost of a nursing home in the state in question. The
person is then ineligible for Medicaid during the resulting number
of months. Several provisions limit the impact of the transfer
penalty. First, Medicaid officials can consider only transfers made
during the 36-month "look-back period" preceding the application for
Medicaid (or 60 months for transfers made to certain trusts). As a
result, it is prudent not to apply for benefits in the three years
after a large transfer. Second, the transfer of assets to particular
categories of individuals, such as spouses and blind or disabled
children, will not bring about a penalty. Finally, a penalty can be
completely wiped away, or "cured," if the transferred asset is
returned, or the penalty may be reduced to the extent that the asset
is partially returned.
Treatment of Income
The starting point for dealing with income under
Medicaid is that nursing home
residents pay all of it, less certain deductions, to the nursing
home. The types of deductions are as follows: a $60 per month
allowance (subject to some variations among the states) for the
resident's personal needs; a deduction for any uncovered medical
costs, including premiums for medical insurance; for married
applicants, an allowance for the spouse at home if he or she needs
income support; and a deduction for any dependent children living at
home. Income attributable solely to the community spouse is
off-limits. It is not taken into account in determining eligibility
and the community spouse will not have to use his or her income to
support the spouse receiving Medicaid benefits in a nursing home.
INNOCENT SPOUSE TAX RELIEF
For most married couples, filing federal income
taxes jointly rather than separately results in a lower tax bill.
However, this "all for one, one for all" approach can have a
downside if questions arise about the accuracy of the return. The
general rule is that both taxpayers will be responsible,
individually as well as collectively, for any taxes, interest, and
penalties owed, even if only one spouse was earning the income. It
may be that in a couple's division of labor only one spouse is in
fact responsible for understating income or erroneously claiming
deductions, but by law each spouse can be made to answer to the IRS.
It is always good advice for anyone signing a tax
return to do so only after carefully reviewing and understanding
every line of it. But even such common-sense measures cannot prevent
mistakes and/or deception from happening. To avoid unfairness in
such circumstances, the Tax Code has provisions designed to protect
"the innocent spouse."
Under this general heading, there are three kinds
of relief: innocent spouse
relief, relief by separation of liability, and equitable relief. To
request relief, a taxpayer must file the appropriate form with the
IRS no later than two years after the IRS first tries to collect the
tax. An attached statement must explain why the taxpayer believes he
or she qualifies for relief. If the IRS rejects the claims for the
first two types of relief, it will automatically determine whether
equitable relief is warranted.
Innocent Spouse Relief
An innocent spouse must meet the following
conditions to qualify for relief: (1) a joint return understated
taxes because of erroneous claims by the requesting party's spouse,
such as unreported or underreported income, or unjustified
deductions or credits; (2) when the return was signed, the innocent
spouse did not know or have reason to know that there was an
understatement of tax. If the spouse knew, or should have known,
that there was an understatement, but did not know by what amount,
partial relief may be given; and (3) in light of all of the
surrounding circumstances, it would be unfair to hold the requesting
party liable for the understatement of tax. Among the factors taken
into account by the IRS are whether the taxpayer benefited from the
erroneous return in the form of a higher standard of living and
whether the joint filers later were divorced or separated.
Separation of Liability
Separation of liability means an allocation
between the spouses of unpaid liabilities resulting from the
understatement of taxes owed. Either of the following requirements
must be met: The parties filing the joint return are no longer
married or are legally separated, or the joint filers were not
members of the same household at any time during the 12-month period
before the relief is sought. This relief is not available if spouses
transfer assets between themselves to avoid tax or as part of a
fraudulent scheme. Another disqualifying factor is actual knowledge
of the other spouse's erroneous items on a return that gave rise to
the deficiency.
Equitable Relief
As a last resort, equitable relief may be
available when there has not been any fraud and, all things
considered, it would be unfair to hold the spouse seeking relief
liable for the understatement or underpayment of tax. A broad range
of "fairness" factors may be considered by the IRS. There is no
exhaustive list, but some examples include separation or divorce,
economic hardship if relief is not granted, and the fact that the
tax for which relief is sought is attributable to the other spouse.
Weighing against equitable relief would be factors such as knowledge
of the items causing the understated tax, receiving a significant
benefit from that understatement, or not making a good-faith effort
to comply with federal income tax laws for the tax year in question.
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