Small Business Protection and the CARES Act

The Coronavirus Aid, Relief, and Economic Security Act (“CARES”) has been signed into law to aid against the economic impacts created by the spread of the coronavirus. One program under the CARES Act, known as the Paycheck Protection Program (“PPP”), provides protection to small businesses and nonprofits by providing low interest loans (with interest capped at 4%) with loosened requirements compared to those generally applicable to small business loans. The loans are made by private lenders and will be guaranteed by the Small Business Administration (“SBA”). The loans are nonrecourse loans, meaning there is no recourse against an individual shareholder, member, or partner so long as the proceeds are used for one of the reasons outlined below. There are no personal guarantee or collateral requirements for these loans. In addition, these loans may be fully forgivable, subject to certain requirements outlined below.

Beginning April 3, 2020, small businesses and sole proprietorships can apply for the loans under the PPP through existing SBA lenders. Applications can be submitted beginning April 10, 2020 for independent contractors and self-employed individuals through existing SBA lenders. Applications can be submitted through all other lenders once they enroll in the PPP. Although the PPP is open until June 30, 2020, borrowers are encouraged to apply as quickly as possible because there is a cap on the amount allotted for the loans.

These loans apply to businesses that employ no more than the greater of:
• 500 employees; or
• The size standard established by the SBA for the industry in which the business operates.

The loans also apply to certain restaurant, hotel, food and beverage service and hospitality industry businesses with an NAICS code beginning with 72 that employ fewer than 500 employees per physical location. For the purposes of determining the 500-employee threshold, applicants should include full time, part-time and other basis employees. General SBA affiliation rules apply, subject to certain waivers for NAICS 72 businesses, franchises, and businesses licensed under Section 301 of the Small Business Investment Act. This may preclude many companies owned by private equity from taking advantage of the program.

The maximum loan amount is determined as the lesser of:
• 2.5 times the average monthly payroll costs during the 1-year period prior to the date the loan is made plus the outstanding amount of certain SBA loans made on or after January 31, 2020; or
• $10,000,000.

The maximum loan amount equation outlined above varies for seasonal employers and those not in business during the period beginning 2/15/2019 and ending 6/30/2020.
These loans can be used for the following payments (subject to certain specified exclusions):

• Payroll costs;

• Group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;

• Employee salaries, commissions, or similar compensations;

• Mortgage interest payments incurred before February 15, 2020;

• Rent under leases entered into before February 15, 2020;

• Utilities for which service began before February 15, 2020; and

• Interest or other debt obligations that were incurred before the covered period.

Guidance from the United States Treasury Department has indicated that the loans will be forgiven so long as they are used for the purposes outlined above over the 8 weeks after receiving the loan and employee headcount and compensation levels are maintained. Also, it is anticipated that no more than 25% of the forgiven amount can be used for non-payroll costs. Borrowers have until June 30, 2020 to restore full-time employment and salary levels for any changes made between Feb. 15, 2020 and April 26, 2020.

In order to obtain a loan, the borrower must make the following certifications:

• The uncertainty of economic conditions makes necessary the loan request to support operations;

• The funds will be used for one of the above-listed uses; and

• Borrower has not previously submitted an application or received proceeds for the same purpose and amount.

Further, borrowers will need to have been in operation on February 15, 2020 and had employees for whom it paid salaries and payroll taxes.

We understand the SBA has been working to create a streamlined loan application through an electronic portal to facilitate its and the participating lenders’ ability to move applications through the system and disburse the $349 billion as quickly as possible. We also understand that the SBA is working on regulations implementing the PPP and providing guidance in anticipation of the CARES Act enactment. The regulation may come out in stages, and we will attempt to provide further guidance to our clients as new information becomes available. If you have any questions regarding the PPP, please contact a member of our Corporate/Business Law group.

The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.

FAMILIES FIRST CORONAVIRUS RESPONSE ACT AND WHAT IT MEANS FOR EMPLOYEES AND EMPLOYERS IN NEBRASKA

On March 18, 2020, in response to the novel coronavirus pandemic, Congress enacted the Families First Coronavirus Response Act to provide Americans paid leave, free testing, and access to certain health benefits in order to protect public health. The Act contains two divisions that specifically detail the responsibilities of the employee and employer:

• Division C –Emergency Paid Leave Act of 2020

• Division D – Emergency Unemployment Insurance Stabilization and Access Act of 2020

DIVISION C –EMERGENCY PAID LEAVE ACT OF 2020

Division C provides benefits to employees and employers when an employee is unable to work due to COVID-19.

Qualification Criteria

Employee:
• The employee has a current diagnosis of COVID-19
• The employee is quarantined (including self-imposed quarantine), at the instruction of a health care provider, employer, or government official, to prevent the spread of COVID-19.
• The employee is caring for another person who has COVID-19 or who is under a quarantine related to COVID-19.
• The employee is caring for a child or other individual who is unable to care for themselves due to the COVID-19 related closing of their school, childcare facility, or other program.

Employer:
• Government employer
• Companies with 50 – 500 employees
Employers with greater than 500 employees are required to pay the employee during the 80 hours of emergency leave, but are eligible for reimbursement through tax credit.
These benefits are active from January 19, 2020 to January 19, 2021. The benefits can be paid retroactively with applications until July 19, 2020.

The Benefits:
• Regular to two-thirds of the individual’s average monthly earnings (based on the most recent year of wages or self-employment) up to a cap of $4,000.
• Applicants can apply online, by phone, or by mail. In most cases, payments will be issued electronically.
• The beneficiary is responsible for applying.

Summary:
Employees will be compensated for up to weeks (80 hours) of regular pay if they are quarantined or self-quarantined. Employees who are quarantined in order to care for another person who has COVID-19 or for a child is entitled to two-thirds their regular rate of pay for two weeks (80 hours). Covered employers are eligible for dollar-to-dollar reimbursement through tax-credits for all qualifying workers.

DIVISION D – EMERGENCY UNEMPLOYMENT INSURANCE STABILIZATION AND ACCESS ACT OF 2020

Division D provides benefits to individuals who are unemployed due to COVID-19.

In order to slow the rate of novel coronavirus (flatten the curve), many businesses have temporarily or permanently closed which has resulted in massive layoffs. Division D of the Act expands existing Unemployment Insurance to address the current employment environment for many Americans. If an employer cannot retain their current number of employees or must reduce employees’ hours have the follow responsibilities.

Duties and Responsibilities

Employer:
• Must provide notification of potential unemployment insurance eligibility to laid-off employees
• Must ensure that employees have at least two ways to apply for benefits
• Must notify applicants (the laid-off employee) when an application is received and being processed and if the application cannot be processed, provide information to the applicant about how to ensure successful processing. Employee
• Must apply for unemployment insurance
• Not obligated to seek employment between March 22, 2020 and May 2, 2020.

Benefits:
In general, the unemployed worker in Nebraska will receive half their regular weekly wage up to $440 each week and an additional $600 provided by the Act in effort to mitigate the economic impact of the novel coronavirus pandemic. Short Term Compensation may be available to employees whose hours have been cut due to the pandemic. Benefits should be sought through NEworks.nebraska.gov.

Qualifications:
• Unemployed worker has had one unpaid week
• Unemployed worker whose job loss is due to no fault of their own
• Self-employed worker whose earnings have been impacted by the pandemic

Summary:
Employees who are laid off or face reduced hours due to COVID-19 may apply for unemployment benefits or short term compensation and are not required to seek new employment between March 22, 2020 and May 2, 2020. The turn around time for receipt of benefits is not currently known.

Matthew D. Quandt accepted into TIDA (the Trucking Industry Defense Association), one of only six attorney members in Nebraska/Iowa.

The Trucking Industry Defense Association (TIDA) is a nonprofit association with members devoted to sharing knowledge and resources for defense of the trucking industry. Founded in 1993, TIDA has become the organization of choice for over 1,600 motor carriers, trucking insurers, defense attorneys and claims servicing companies. The organization is committed to reducing the cost of claims and lawsuits against the trucking industry. Members work to develop strategies and share knowledge to defend the trucking industry in personal injury, property damage, workers' compensation and cargo claims. TIDA members advocate on behalf of the industry’s interests.

As part of his trucking defense practice, Mr. Quandt offers 24-hour rapid response: facilitate on-scene investigation, organize applicable post-crash testing, collect driver and company documents, take steps to maintain confidentiality and expert work product, ensure FMCSR compliance, etc.

Arbitration - Preparing for the Important Preliminary Hearing

A guiding principle for an Arbitrator is to hear all the evidence that may be relevant and material in order to understand and determine the dispute. A well-organized preliminary hearing is critical to fulfill that principle.

Because an arbitration demand is not usually a very detailed account, often only a limited amount of information is exchanged in the early stages of arbitration. The parties and their attorneys may have had little or no contact with each other since the dispute arose, except to choose the arbitrator.

It surprises me that many attorneys do not realize that they are to participate in a preliminary hearing. As noted, the preliminary hearing is a critical step in the arbitration process. I've also found that the large number of attorneys are not prepared for the preliminary hearing.

These are my suggestions to improve the quality of their arbitration advocacy and put them on the right path to obtain the benefits of arbitration.

1. Often the Claimant files a general demand, i.e. Respondent breached the contract and owes $50,000. That does not tell the Arbitrator much about the case. If possible, the attorneys should indicate all theories of recovery and relief sought and the calculation of damages. This allows the Arbitrator to determine whether the case is complex or simple. Also a more detailed Complaint, Answer or Crossclaim narrows the issues for the Arbitrator.

2. Attorneys should realize that they have an important part in the proceedings. They should discuss scheduling dates on which the clients and witnesses (both fact and expert) will be available. Before the preliminary hearing, the attorneys should confer to discuss:

• Available dates for the evidentiary hearing.

• The scope of document discovery.

• The dates for exchanging documents.

• Deadlines for Exhibit Lists.

• Deadlines for Witness Lists.

• Dates for exchanging their expert's reports.

• Whether either party plans to file any prehearing motions, and if so, the dates for filing and replying to them.

• How much time each side will need for direct and cross-examination at the evidentiary hearing.

• Whether the parties want a court reporter?

3. The Attorneys should at the preliminary hearing inform the Arbitrator what type of award they want. Failure to tell the Arbitrator the form of the award could result in an award that fails to address every claim or counterclaim. Attorneys should be aware that the more detailed an award, the more cost to the client. Obviously, the Arbitrator charges for the time taken to draft the award.

UNIFORMED SERVICES EMPLOYMENT AND REEMPLOYMENT RIGHTS ACT Rights for Employees and Obligations for Employers

The United States Court of Appeals for the Eighth Circuit recently affirmed the ruling of the United States District Court for the District of Nebraska on claims under the Uniformed Services Employment and Reemployment Rights Act (USERRA). These claims were filed by a former military service member against his employer for allegedly discriminating and retaliating against him due to his prior service in the military and his decision to exercise certain statutory rights. Neither claim withstood a motion for summary judgment.

Facts of the Case

David McConnell began serving on active duty in the United States Army in 1999 and retired in 2008. Prior to his retirement, McConnell sustained two long-term disabilities: (1) post-traumatic stress disorder, and (2) a back injury which prevented him from lifting more than forty pounds.

In November 2012—four years after his retirement—McConnell interviewed for the position of service center manager for Anixter, Inc.’s Grand Island, Nebraska facility. McConnell informed the hiring supervisor of his service-related disabilities. Anixter replied it would have no problem accommodating his disabilities. The hiring supervisor told McConnell that his military experience was viewed positively by Anixter because the skillset gained through his service would be needed for McConnell’s new supervisory position.

McConnell obtained the position of service center manager, in which he directly supervised several Anixter employees. During his time in this supervisory position McConnell had two separate altercations with subordinates. The first altercation occurred in May 2013, involving McConnell’s use of vulgarity with the employee under him. McConnell’s supervisor issued him an oral warning not to use such language toward a subordinate. The second occurred in August 2013, involving the same behavior. Following the second altercation, McConnell’s supervisor issued a written warning to McConnell notifying him that if he did not refrain from using vulgar language and learn to control his temper, further disciplinary action, including termination, might become necessary.

Following the written warning, McConnell maintained his position without incident until December 2014. At this time, McConnell and his supervisor had a strong disagreement during a phone conversation. This disagreement surrounded changes the supervisor wanted to implement regarding McConnell’s supervisees’ work schedules. By the end of the phone conversation the dispute had escalated to the point that McConnell requested a break to allow him to manage his PTSD. Following this request, his supervisor sent McConnell home. McConnell was fired from Anixter four days later.

Employee’s Claims and Suit

McConnell filed suit against Anixter in federal district court in January 2017. Filed under the Uniformed Services Employment and Reemployment Rights Act (USERRA), McConnell alleged that Anixter discriminated and retaliated against him because of his prior service in the military and his decision to exercise certain statutory rights. The district court entered summary judgment on all issues for the employer.

The issue on appeal involved whether the motivating factor in Anixter’s decision to terminate McConnell was in violation of USERRA. That federal law precludes an employer from allowing an individual’s military status or an individual’s decision to exercise rights set forth under USERRA to motivate an employer’s adverse employment action against an employee.

To establish that military status was a motivating factor, the party invoking protection under USERRA may use three factors. The first factor is “the employer’s expressed hostility towards members protected by the statute together with knowledge of the employee’s military activity.” The second factor is “the proximity in time between the employee’s military activity and the adverse employment action.” The third factor considers “any inconsistencies between the proffered reason and other actions of the employer.”

McConnell was unable to establish the first factor due to the fact that McConnell’s hiring supervisor expressed a positive outlook on McConnell’s military experience during the interview process. McConnell was unable to establish the second factor due to the fact that four years had passed between the time McConnell was on active duty and the time he was hired by Anixter. Because of this extended period, the inference that his participation in the military motivated Anixter’s decision to terminate McConnell was highly unsupported.

Lastly, McConnell was unable to establish the third factor because both parties agreed the altercation between McConnell and his supervisor left McConnell extremely frustrated. It was also undisputed that McConnell’s frustration at this event required him to take a break from the situation in order to manage his stress. Because this undisputed altercation occurred after McConnell received written notice that he could face termination if he failed to learn to control his temper, there are no inconsistencies between the proffered reason and other actions of the employer. In sum, McConnell failed to establish any of the three factors, and as such, he failed to establish that his military status was a motivating factor in the termination of his employment. Therefore, he could not proceed to trial on his USERRA claim.

Bottom Line for Employers

USERRA offers strong protection for service member employees. Prevailing in court on such a claim can be a challenge. If faced with a thorny issue involving a service member employee, or any employee, you are encouraged to consult with an experienced attorney to avoid any issue that could land you in court. Bonnie M. Boryca, attorney at Erickson | Sederstrom, PC, in Omaha, Nebraska, was assisted by second-year law student and E|S law clerk Chelsey L. Gilinsky in writing this article. Ms. Boryca works with employers, executives, and employees and can be reached at 402.397.2200 or boryca@eslaw.com.

What Is the SECURE Act and How Could It Affect Your Estate Planning?

The SECURE Act, which stands for “Setting Every Community Up for Retirement Enhancement,” enacted numerous provisions that may impact your estate plan beginning January 1, 2020. Perhaps the most noteworthy provision in the realm of estate planning relates to inherited retirement accounts. The previous rule, often referred to as the “stretch IRA,” allowed individuals inheriting retirement accounts to stretch out required minimum distributions (RMDs) over their own lifetimes. The new provision implemented by the SECURE Act, which will apply only to account holders dying on or after January 1, 2020, eliminates the stretch distribution, and will now require a full payout of the inherited IRA within 10 years of the original account holder’s death. Although there are limited exceptions to this rule, such as inherited retirement accounts collected by the surviving spouse of the decedent, the SECURE Act will undeniably have a significant impact on many estate plans. The implications will vary and could have very different consequences depending on each individual’s goals and assets held inside IRAs.

Other notable ways the SECURE Act may impact your retirement include an increase in the age that triggers required minimum distributions ("RMDs") from 70½ to 72, as well as repealing the age-based restriction on contributions, which means individuals may now make contributions to a traditional IRA for an indefinite period. The SECURE Act contains several other tax-advantageous provisions for both individuals and employers, such as including part-time employee participation in 401(k) plans. These changes were designed to ultimately strengthen retirement security nationwide.

For more information regarding the Secure Act or any other related matters, please reach out directly to Michelle J. Daniels, William T. Foley, or any of the other experienced attorneys at Erickson | Sederstrom.

This article does not create or constitute an attorney-client relationship and is not intended to convey or constitute legal advice. It is important to speak with a qualified professional regarding your specific matter prior to taking any action.

Managing Employee Arrests and Convictions

Question: One of our employees has been arrested but not convicted. It doesn’t appear he’s going to be released in the new future. Is it better to put him in an unpaid “leave” status or fire him?

The answer to this question depends on a number of factors. The law generally prevents employers from taking action, or refusing to hire employees, based solely on arrest records, as opposed to actual convictions. However, if you have additional evidence or information which corroborates the reasons for the actual arrest, which independent evidence would tend to establish that the employee is guilty of a crime which is job related and which would render him unsuitable for the position in which he is employed, you would be on solid ground in terminating the employee based upon the totality of the available evidence and information. Additionally, to the extent he will be absent for an extended period, if you have strict attendance policies, or no-fault attendance policies, you will have grounds to terminate the employee based upon violation of your attendance policies, as incarceration is not a legitimate excuse for an employee’s failure to show up for work in compliance with your attendance policies. If you determine that you will not terminate the employee, at the very least you should place the employee on unpaid leave pending resolution of his criminal case.

New Year’s Resolutions for HR Professionals – 2020 Checklist

The start of a new year is an excellent time for HR professionals to focus on key New Year’s resolutions in terms of proper Human Resources management. Although none of us typically follow through on every New Year’s resolution we make, the following provides a thoughtful checklist of resolutions and actions that should pay great dividends in the coming year, and potentially save costly resources down the road through avoidance of employment claims and litigation. Let’s get right to the checklist.

Employee Handbook & Policy Review: Conduct a thorough review of your employee handbook and other written policies to determine if revisions are necessary due to changes in employment laws at the state or federal level. Do your employee handbook and other policies sufficiently preserve your right to exercise management discretion to determine when employees can be terminated at will? Do you have an appropriate acknowledgement form on file for every employee to whom your employee handbook has been issued, which confirms receipt of the handbook and acknowledges that, absent a formal contract, employment is at will? Do you have an appropriate sexual harassment/workplace harassment policy? Has it been provided to all employees, and does it clearly articulate an internal mechanism to register complaints? If you are covered by the Family and Medical Leave Act (FMLA), are your FMLA policies up-to-date?

Review Employment Applications: Your employment application should be carefully reviewed on an annual basis, to ensure that you are only requesting valid job-related information, and not requesting any information about an applicant’s age, previous injuries, worker’s compensation claims or disabilities? Your application is critical, as the application itself can become the subject of an employment discrimination charge or legal action.

FMLA and ADA FORMS: Review your form library to ensure that you have all of the proper forms in place for utilization whenever an employee requests medical leave or accommodation for a disability. Are you possibility using outdated forms or handling requests on an inconsistent basis? This is simply a good time to review your policies and procedures in this area.

Wage & Hour Audit – Exempt Classification Review: Conduct a thorough audit of your exempt and non-exempt classifications, to ensure that your salaried employees who are deemed exempt from overtime truly meet all aspects of one of the recognized exemptions, and do all such employees who are “exempt” meet the “salary basis” test? Are your hourly employees subject to overtime properly recording all hours worked? Do you have sufficient procedures in place to ensure compliance with overtime requirements and regulations? Are you properly including non-discretionary bonuses in the regular rate for hourly employees for overtime calculation purposes?

Review Job Descriptions: Job descriptions are not a luxury, but rather a necessity. Accurate, up-to-date job descriptions are critical, not only with respect to establishing employee expectations and performance parameters, but also when it comes to complying with the Americans with Disabilities Act (ADA) and its various requirements.

Supervisory Training: When was the last time you conducted training for all supervisors on the basics of diversity and harassment in the workplace, wage and hour administration, FMLA and ADA requirements, etc.? If it has been more than 18 months to 2 years ago, now would be an excellent time to conduct supervisory training early in the new year.

Review Employee Evaluation Policies and Procedures: You should thoroughly review and examine how you are evaluating employees and grading performance. Employee evaluations can be an excellent management tool, but they can also become a major problem if not properly and effectively administered., e.g. we are often called upon to defend a disciplinary or termination decision, and although it is apparent that performance problems existed, the problems and issues were never accurately reflected on a recent performance evaluation. It is imperative that employee evaluations are performed on a timely and accurate basis to reflect the employee’s actual performance and any identified shortcomings.

The above checklist presents a few suggested New Year’s resolutions. No such checklist is ever complete, and everyone will undoubtedly want to expand on this list. Taking some time at the start of the year to focus on these issues will provide continuous benefits going forward.

Erickson | Sederstrom Welcomes New Attorney Blake S. Schneiderwind

Erickson | Sederstrom is pleased to announce that Blake S. Schneiderwind has joined the Firm as an associate representing primarily corporate clients in all aspects of business, from formation and start-up to mergers and acquisitions, and general counsel matters. Blake also aids clients in the health care field in the areas of licensure disputes, health care compliance, and data privacy and security.

Blake graduated magna cum laude in 2019 from Creighton Univerisity School of Law. While at Creighton, he was a member of Creighton’s International Trademark Association Moot Court Team. He received the Cali Excellence for the Future Award for Business Planning, Business Associations, Health Care Organizations, and HIPAA Privacy and Security.

Nebraska Supreme Court Upholds PSC Approval of Keystone XL Route

On August 23, the Nebraska Supreme Court issued its long-awaited opinion in the Keystone XL pipeline route approval case that was argued before the court in fall, 2018. Issued as In Re Application No. OP-0003 and cited as 303 Neb. 872, the opinion stems from a suit brought by landowners and advocacy organizations in opposition to the Nebraska Public Service Commission's decision in November of 2017 to approve the Mainline Alternative Route (MAR) for the Keystone XL Pipeline.

In a 59-page, unanimous decision, authored by Justice Funke, the Court stated:

"In summary, the PSC is an elected body created by the Nebraska Constitution to serve the public interest... the legislature determined that '[t]he construction of major oil pipelines in Nebraska is in the public interest...' The Legislature designated the PSC as the agency responsible for determining which pipeline route is in the public interest. After months of careful consideration, the PSC determined that the evidence showed that the MAR (Mainline Alternative Route) is in the public interest. Upon de novo review, we find there is sufficient evidence to support the PSC's determination that the MAR is in the public interest. The assignments of error are without merit."

While those who argued in favor of the project welcomed the news, those who have long opposed the project, like Bold Nebraska founder and current Chair of of the Nebraska Democratic Party, Jane Kleeb, issued comments stating the Legislature, or a new President in 2020 could seek to undo the opinion issued by the Supreme Court.

Nebraska Supreme Court Draws a Fine Line Between Federal and State Arbitration Laws in Home Sales

On any given day, millions of Americans are entering into contracts both big and small. Some of these contracts represent the terms and conditions for a major life decision for those people, while other contracts represent transactions that no one would give a second thought to. For example, as you are reading this article there is likely someone signing their name to a contract for a mortgage on the home they plan to raise their children in. Meanwhile someone somewhere else is agreeing to the terms and conditions of a mobile app designed to super impose animated animals over their face in a selfie. Regardless of the seriousness of the contract, people are more often than not agreeing to arbitration clauses that they never read.

Most people do not even realize that they are agreeing to arbitration clauses that will keep them out of the courthouse when they enter into these contracts. Even more people do not realize that arbitration is governed by one of two sets of laws in most cases, and parties who are not carefully drafting those clauses might find them unenforceable. Recently, in a nasty dispute between a property management company and a home buyer, the Nebraska Supreme Court in Garlock v. 3DS Properties, L.L.C., considered whether an arbitration clause found in the contract for the sale of a home was governed by Nebraska arbitration law or federal arbitration law.

In Garlock, the Garlocks purchased a home from 3DS Properties. The Garlocks later sued 3DS Properties for damages they alleged were caused by serious problems in the home which 3DS Properties did not disclose as required by law. The Garlocks brought this lawsuit in state court, and 3DS Properties sought to have it removed from state court and taken to arbitration. Both the Garlocks and 3DS Properties disagreed on where the Garlock’s claim should be considered. The dispute lasted several years until it eventually landed in the Nebraska Supreme Court. That dispute highlighted two important distinctions that should always be considered by anyone entering into a contract with an arbitration clause in Nebraska.

ATTENTION TO DETAIL REALLY MATTERS

Because the Garlocks wanted their case to be heard in state court rather than in an arbitration court, they argued that the arbitration clause in the contract between them and 3DS Properties was unenforceable under Nebraska’s Uniform Arbitration Act. The Garlocks based this argument on the fact that the contract between them and 3DS Properties contained a clause above the signature line that read:

THIS CONTRACT CONTAINS AN ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

The Garlocks reasoned that because this notice was not underlined it was not enforceable under Nebraska’s Uniform Arbitration Act. The Nebraska Uniform Arbitration Act requires that all contracts with binding arbitration clauses include the above notice which must be capitalized and underlined in order to be enforceable. Because this notice was not underlined the Nebraska Supreme Court reasoned that, standing alone, the arbitration clause in the contract between the Garlocks and 3DS Properties was unenforceable on its face under Nebraska law.

This one minor detail was missed by 3DS Properties in the drafting of its real estate sale contract and highlights the importance of utilizing a qualified attorney in the contract review process. 3DS Properties was not without a strong counterargument, however.

ARBITRATION MATTERS ARE GOVERNED BY BOTH STATE & FEDERAL LAWS

3DS Properties badly wanted to have this dispute heard in arbitration court. To do this, 3DS Properties had to counter the Garlock’s argument that the arbitration clause was unenforceable because it failed to have an all capitalized and underlined notice. Rather than accepting Nebraska law as the governing choice of law, 3DS Properties argued that the arbitration clause governed by federal arbitration law and therefore did not have to include an underlined notice.

This argument was based on the Nebraska Supreme Court’s holding in Wilczewski v. Charter West National Bank where the Court held that federal arbitration laws applied to all contracts formed in interstate commerce under Title 9 of the United States Code. In cases where federal arbitration laws apply, contracts do not have to meet the requirements under Nebraska’s Uniform Arbitration Act. In Wilczewski, the sale of a home under foreclosure contained an arbitration clause which the buyers argued was unenforceable under Nebraska’s Uniform Arbitration Act. There, the Court reasoned that the arbitration clause did not have to comply with Nebraska’s Uniform Arbitration Act because the sale of homes in foreclosure are done by banks who are integral parts of the stream of interstate commerce.

3DS Properties tried to harness this reasoning in their dispute against the Garlocks. The Nebraska Supreme Court, however, disagreed when they determined that the simple sale of a home, rather than a foreclosure done by a bank, was purely an intrastate activity rather than an interstate activity. In other words, contracts governing the sale of real estate in Nebraska which do not involve parties from other states or lenders from other states is considered an intrastate activity and must conform to the requirements of the Nebraska Uniform Arbitration Act for arbitration to be binding.

IMPORTANT TAKEAWAYS FROM THE GARLOCK CASE

First, the details really do matter. Whether you are drafting a contract, or you are agreeing to a contract someone else has drafted it is important to fully understand all terms, conditions, and laws that govern those terms and conditions. In the case of Garlock, the parties could have avoided thousands of dollars in expenses, and years of litigation by simply underlining a single sentence in their sale contract. Moreover, the parties could have saved a great deal of trouble by having a qualified attorney review their sales contract prior to its execution.

Second, the context of a contract can completely change the arbitration laws it is governed by. If you are a party who prefers arbitration over traditional litigation, it is imperative that you understand the context in which your contract is being executed. In Garlock, the parties were selling a home in a simple real estate transaction and therefore the arbitration laws of Nebraska applied to the formation of their contract. However, had these parties been using an out of state lender, or selling the property in a foreclosure, the federal arbitration laws would have applied to the formation of their contract.

If you are in the middle of trying to sort out the contents of an important contract, please do not go it alone unless you fully understand the legal ramifications of what you are drafting or agreeing to. If you have questions about contracts, the clauses in those contracts, or arbitration and arbitration clauses make sure you get in touch with a qualified attorney before it becomes a mess you cannot get out of.

Title Defect Renders Collateral Useless; Bank Unable to Cover Losses from Loan Default

A recent Nebraska Supreme Court decision illustrates why individuals should always seek advice of counsel before entering into a financial agreement. In Foundation One v. Svoboda, the Nebraska Supreme Court affirmed a lower court’s ruling that a Bank could not recover vehicles pledged as collateral to secure a loan because a gap in title indicated the Borrower did not own the vehicles. 303 Neb. 624, ___ N.W.2d ___ (2019).

Foundation One loaned $200,000 to Jason Svoboda upon Svoboda pledging two Mack trucks as collateral to secure the loan. In order to maintain the priority of its claim to the vehicles the Bank paid $85,141.40 to remove several preexisting liens on the truck titles. When the Svoboda defaulted on the loan, the Bank repossessed both trucks, eventually selling one for $95,000. Before the Bank could sell the second truck, however, the legal owner intervened in the case.

The trial to determine the legal owner of the trucks brought some startling facts to light. Prior to obtaining the loan, and unbeknownst to the Bank, Svoboda had engaged in a scheme to fraudulently transfer title from the legal owner, Lehr, Inc., back to Svoboda, to use the trucks as collateral for his loan. This scheme left a gap in the trucks’ chain of title. Lehr, Inc. presented evidence at trial showing that the trucks were, at all relevant times, the legal property of Lehr, Inc., and not Svoboda.

The jury verdict ordered the Bank to return the truck remaining in its possession, and to pay an additional $95,000 to Lehr (the amount the Bank received for the sale of the other truck). The jury verdict left the Bank with the full $200,000 amount of the loan, less any payments made before the Borrower’s default. Reviewing the case on appeal, the Nebraska Supreme Court commented that the Bank is required to show a clear chain of title from any previous owners of the trucks to the Borrower, and from the Borrower to the Bank. Id. at 633, ___ N.W.2d at ___. Ultimately, the Bank could not claim an interest in either truck because “the evidence, on its face, . . . showed a break in the chain of ownership between Lehr and [the Borrower] and did not show clear title in [the Bank].” Id.

If the Bank had conducted a more thorough investigation regarding the vehicles offered by Svoboda, it would have avoided the loss in question.

Nebraska Legislature Considers Property Tax Relief Procedure for Property Owners Whose Property has been Damaged by a Natural Disaster

Lawmakers heard LB512, introduced by Senator Lou Ann Linehan, on April 9. The bill contains alterations in state tax law that were requested by the state Department of Revenue. The bill allows for a property owner to petition his or her county assessor for a reassessment of property value if the property was damaged or destroyed by a natural disaster. Senator Steve Erdman introduced an amendment, adopted 41-0, which would require the county assessor to report all real property destroyed by a fire or other natural disaster to the county board of equalization. The county board would then adjust the value. Senator Curt Friesen supported the amendment and stated that the amendment would not have a significant effect on a political subdivision tax revenue. Property owners who suffered significant losses in this year’s flooding should consider consulting with counsel to determine their options to reduce property tax liability.

Personal Assets are Not Protected If Corporate Formalities Are Not Followed

A recent Nebraska Supreme Court case illustrates the need for your business to comply with basic corporate formalities to protect yourself from personal liability.  In Thomas Grady Photography v. Amazing Vapor, the Nebraska Supreme Court held that a business owner must disclose his or her capacity as an agent of a corporation to escape personal liability for contracts made. 301 Neb. 401 (2018). Grady Photography filed suit against Amazing Vapor, MCJC Companies, Manuel Calderon, and Thomas Anderson for breach of contract for failing to pay on two contracts for photography services.  The court ultimately held that Anderson was individually liable for breach of both oral contracts because Anderson did not inform Grady of the corporate status of Amazing Vapor throughout the entirety of their business relationship. 

Erickson | Sederstrom’s attorneys have significant experience working with entities of all sizes to ensure that their corporate structure protects them from personal liability.  If you have any questions about whether your entity is in fact protecting you from personal liability or if you need assistance in forming a corporation, limited liability company or other entity to protect your personal assets, attorneys Paul Heimann, Bill Foley, Andrew Collins and Michelle Elkin would be happy help. 

Nebraska Supreme Court emphasizes statute of limitations and uniformity of policies in employment discrimination and retaliation claims

The Nebraska Supreme Court recently ruled on claims for disability discrimination and alleged retaliation against an employee for her filing of a worker’s compensation claim. Neither claim withstood a motion for summary judgment. The case is a helpful reminder of the importance of adhering to your policies in every instance and also shows how strictly courts will apply statutes of limitations, to an employer’s benefit here.

Facts of the Case

            Regional West Medical Center in Scottsbluff employed Melinda Brown as a customer service representative in its financial services department. She fell in the parking lot on August 16, 2011, injuring her hand and wrist. Ms. Brown filed a worker’s compensation claim with the medical center. She took twelve weeks of leave under the Family Medical Leave Act.

            Following the FMLA leave, Ms. Brown was granted another eight weeks of director-approved leave, consistent with the medical center’s policies. Also consistent with such policy, the eight week leave was granted but the medical center did not guarantee her position would be held for her at its expiration, and informed her she should apply for open positions during the leave. This leave was to expire on January 7, 2012.

            While on leave, Ms. Brown submitted a request for a reasonable accommodation to perform her customer service job. Her alleged impairment was limited use of her injured hand. The accommodation requested was simply to have a job to come back to after she was cleared of restrictions by her physician. Ms. Brown never returned to work after the accident or after her periods of approved leave.

            Instead, she was placed on furlough status on January 8, 2012, in further accord with Regional West Medical Center’s policies. The policy was to place an employee who does not return from leave on furlough status for up to one year from the date of the initial absence, during which she continued to receive employee benefits, was not paid salary, and in which her job was not held for her. To return during the one-year furlough, Ms. Brown would have to apply and be approved for an open position at the medical center. Ms. Brown received a letter January 12, 2012 informing her of this.

            Ms. Brown’s furlough expired on August 15, 2012; one year after her work-related injury absences began. She applied for no jobs at the medical center during furlough. On that same date, the medical center sent Ms. Brown a termination letter, citing the expiration of the furlough as the reason for “administratively ending your employment.”

Employee’s Claims and Suit

            Ms. Brown filed a charge of disability discrimination under the Americans with Disabilities Act and the Nebraska Fair Employment Practice Act on December 20, 2012. She claimed that she was denied a reasonable accommodation and terminated because of her disability. The Nebraska Equal Opportunity Commission ultimately issued a right to sue notice.

            The ADA and NFEPA claims were brought in the District Court of Scottsbluff County along with a common claim of retaliation for filing a worker’s compensation claim. That court entered summary judgment on all claims, and the employee appealed to the Nebraska Supreme Court.

            The issue on appeal with regard to the ADA and NFEPA claims of discrimination involved the statute of limitations for filing those charges with the NEOC. There was no genuine dispute of material fact that Ms. Brown was sent the letter notifying her of the expiration of her furlough’s expiration date and that she would be terminated upon that occurrence. The date of the letter was January 8, 2012, and she acknowledged receiving it soon after within her NEOC charge of discrimination.

            It was that letter that constituted the adverse act by the medical center against Ms. Brown. The letter was clear that she was going to be terminated on August 15, 2012 unless she applied and obtained another position during her furlough. She never even applied for another position during that time. Thus, the medical center’s decision was known to Ms. Brown in January 2012.

            A charge of discrimination under Nebraska and federal law must be filed with the NEOC within 300 days of the adverse action against the employee. The Court found that date was in January 2012 here, yet Ms. Brown did not file her charge until December 20, 2012, more than 300 days after the letter was sent to her. As a result, the Court affirmed the lower court’s dismissal of the claims because of the expired statute of limitations.

            The claim of retaliation for filing a worker’s compensation claim did not have to be submitted first to the NEOC or any agency. It was appropriately brought in court and within the requisite time period. However, that claim failed because the undisputed material facts showed it could not be proven to any reasonable jury at a trial.

            To establish retaliation in this context, a plaintiff must establish that she filed a worker’s compensation claim, that she was terminated from employment, and that a causal link exists between the termination and filing the claim. A retaliatory motive may be shown by proximity in time between filing the worker’s compensation claim and the termination, coupled with satisfactory prior work performance and good supervisor evaluations.

            In Ms. Brown’s case, the evidence indisputably showed that there were 20 weeks between the time of filing for worker’s compensation benefits and her administrative furlough. It was even longer until she was administratively terminated (which occurred one year after her first absence for the work-related injury). Most significant, Regional West Medical Center’s human resource officers had testified in depositions that they followed the absence, leave, and furlough policies to the letter and in the same manner as with employees similarly situated to Ms. Brown. Thus, there was no evidence of a retaliatory motive and the time between the worker’s compensation claim and the termination was not proximate.

Brown vs. Regional West Med. Ctr. 300 Neb. 937 (2018).

Takeaway for employers

            This case shows two important principles that repeat in employment claims. First, the statute of limitations can be powerful. Second, clear policies for human resources and supervisors to execute can be equally powerful. Applying those policies similarly in each instance can go a long way to negate any claim of improper motive or unfairness in the policy’s effects. If you have questions about how to craft a clear and easy to execute policy, keep your attorneys just a phone call or email away.

U.S. Supreme Court Takes Broad View of Qualified Immunity for Police Officers

       The United States Supreme Court recently held that a police officer who shot a woman holding a knife outside her home was entitled to qualified immunity because his actions did not violate clearly established statutory or constitutional rights that a reasonable person would have known. Kisela v. Hughes, 584 U.S. ___, 138 S. Ct. 1148 (2018).

       In May 2010, Andrew Kisela and other officers responded to a 911 call that a woman carrying a knife was acting erratically. Officers spotted Sharon Chadwick in the driveway of a nearby house. Then, Amy Hughes, matching the 911 description of the woman acting erratically, emerged from the house carrying a large knife. Hughes stopped near Chadwick, at which time the officers drew their guns. After officers told Hughes to drop the knife twice, Kisela shot Hughes four times. Less than one minute passed from the time the officers first saw Chadwick to when Kisela shot Hughes.

       Hughes sued Kisela under 42 U.S.C. § 1983, alleging Kisela used excessive force in violation of the Fourth Amendment, which the Court did not decide. Instead, it held Kisela was entitled to qualified immunity, even if a Fourth Amendment violation did occur.

       The Court explained that, “although existing case law does not have to be directly on point…existing precedent must have placed the statutory or constitutional question at issue beyond debate” to deny a police officer qualified immunity. Excessive force, particularly, “is an area of the law in which the result depends very much on the facts of each case, and thus police officers are entitled to qualified immunity unless existing precedent squarely governs the specific facts at issue.” Thus, an officer does not violate a clearly established right unless “the right’s contours were sufficiently definite that any reasonable official in the defendant’s shoes would have understood that he was violating it.”  The Court held the facts in Kisela were “far from an obvious case in which any competent officer would have known that shooting Hughes to protect Chadwick would violate the Fourth Amendment.”

       This decision is in line with other recent Supreme Court decision on excessive use of force by police officers.  Claimants asserting excessive use of force claims against police officers must overcome strong deference in favor of the police officers in order to prevail on their claims.

Interaction Between Nebraska Statutes Defining When a Judgment is Entered and Bankruptcy Law

Under federal law, filing a petition in bankruptcy implements an automatic stay regarding judicial actions against the debtor. The Nebraska Supreme Court has clarified whether a judgment violates the automatic stay when the judgment is announced verbally prior to a bankruptcy filing, but signed and file stamped after the filing.

In Doe v. Fireman’s Fund Insurance Co., Jane Doe filed suit in Lancaster County District Court against Red Willow Dairy, Jim Huffman and Ann Huffman. 287 Neb. 486 (2014). Jim and Ann Huffman owned Red Willow Dairy, and Doe alleged the company failed to investigate and supervise an employee that assaulted Doe. Doe filed a motion for default judgment on December 14, 2009, after all defendants failed to answer her complaint. On December 18, 2009, the court sustained the motion for default judgment and directed Doe’s attorney to submit a proposed order within seven days. On December 21, 2009, Red Willow Dairy and the Huffmans filed for bankruptcy.  On December 22, 2009, the judge signed an order for the default judgment, and the Lancaster County District Court Clerk file stamped the order.

As part of a bankruptcy settlement, Doe received rights the Huffmans and Red Willow Dairy might have against Fireman’s Fund Insurance Company for its actions relating to the original lawsuit. Doe filed a complaint against the company, alleging it breached its duty to defend Red Willow Dairy and the Huffmans. In return, Fireman’s filed a motion for partial summary judgment, arguing that the entry of the default judgment violated the automatic stay even though the court announced the judgment three days prior. The district court agreed and granted the motion for partial summary judgment.

Doe appealed the district court’s decision, arguing that signing the order previously announced and file stamping were only clerical in nature and Nebraska should adopt the ministerial exception referred to by United State Court of Appeals for the First Circuit. The “ministerial exception” reasons that when a judicial decree is so clear and unambiguous, the judicial action is complete. Any subsequent announcements that provide a court with no discretion do not violate the automatic stay rule.

The Nebraska Supreme Court declined to adopt this exception, noting that the exception contradicts Nebraska Statute §25-1301. The Nebraska law resolves any uncertainty regarding the commencement of the time to appeal a judgment by defining “judgment” as a decision that is rendered and entered. The court reasoned that the rendition in this case occurred when the default judgment was announced on December 18, 2009. The entry of the default judgment did not occur until December 22, one day after the Huffmans and Red Willow Dairy filed for bankruptcy. Because the district court did not sign and file stamp the judgment until December 22, it did not become a “judgment” until that day. The court reasoned that because the judgment was not finalized until December 22, it violated the automatic stay rule regarding the bankruptcy petition filed on December 21, 2009.

The Nebraska Supreme Court’s decision ensured that the definition of “judgment” stays clear and consistent in Nebraska. Although creditors in other jurisdictions do not violate the automatic stay rule when future proceedings involve only clerical matters, Nebraska creditors must be cautious when it comes to such proceedings.  If you have questions regarding application of the automatic stay rule with regard to collection actions, please contact one of the Erickson|Sederstrom attorneys working in the creditors rights area.

What Happens To My Online Accounts When I Die?

The 2017 Nebraska Revised Uniform Fiduciary Access to Digital Assets Act now allows an individual to provide for their electronic assets in an estate plan. 

        Nebraska, along with over 30 other states, enacted a law which discusses what happens to digital assets after death. The Nebraska Revised Uniform Fiduciary Access to Digital Assets Act (“the Act”) went into effect January 1, 2017, and provides guidance concerning how a fiduciary (e.g. Trustee, Personal Representative) may gain access to the digital devices of a deceased user.

        So what does the Act really mean for you? It’s simple. You can now grant someone the absolute authority to control any and all Digital Devices and digital information in your estate plan.  This, in turn, will provide an easier avenue for a specified individual to gain access to accounts and will grant them with widespread power over your digital devices, whether for the purpose of continuing your business efforts, settling your affairs, or to simply collect lifelong memories. 

        Let’s take a moment to reflect on all the ways we rely on the internet and different online applications in our daily lives.  Some may conduct significant business transactions via PayPal and Gmail; while others may market services, acquire clientele and procure payment through social media accounts, such as Etsy, Twitter, Facebook, and Instagram. Although every person uses technology in varying ways and for different reasons, many do not consider what happens to their digital records upon death.  

       Prior to the enactment of the Act, unless you left a specific person with all your username and password information prior to death, it was common for an individual to have to jump through quite a few hoops if they wanted to acquire access to and control of “digital assets” and digital information of a deceased user from the corresponding provider.  In essence, this meant that even after someone died, many of their digital assets continued to exist, leaving no one the power to access, modify, delete, control or transfer any digital information or communications. If the internet plays such an abundant role in our day-to-day lives, why do we put such a huge emphasis on planning for all other aspects of our lives, but not for this one? After all, time is money, and the effort spent gaining access to an account could undeniably be better spent actually running the account.

        It is also important to note that arrangement for your digital assets is only one aspect of estate planning. Incapacity issues, asset protection for you and for beneficiaries, avoiding probate, and minimizing income taxes are all other aims that can be achieved with proper planning.  In addition, changes in your family or to your assets may render your current estate plan outdated. Therefore, we welcome the opportunity to meet and to discuss all of these matters to ensure that your estate plan reflects your current objectives. 

        For more information on the Nebraska Revised Uniform Fiduciary Access to Digital Assets Act, how to provide for the Act in your estate plan, or any other matters relating to estate planning and probate, please contact Michelle J. Daniels with Erickson | Sederstrom.
 

Does a Small Business Lose Protection under the Iowa Civil Rights Act When It Incorporates?

In a case of first impression, the Iowa Supreme Court recently determined that a corporation cannot qualify for the family-member exemption under the Iowa Civil Rights Act. The Iowa Civil Rights Act prevents discriminatory employment practices and does not apply to “any employer who regularly employs less than four individuals.” Individuals who are members of the employer’s family are not counted as employees under this section.

            In Cote v. Derby Insurance Agency, Inc., the plaintiff filed suit pursuant to the Iowa Civil Rights Act, alleging sexual harassment. The employer, a corporation employed less than four employees, excluding family members, during the relevant time. In December 2015, the employer filed a motion for summary judgment, alleging that the Iowa Civil Rights Act did not apply because the employer regularly employed fewer than four individuals, not counting family members. The district court denied this motion, and the case was appealed. The Iowa Court of Appeals determined that “employer” in the statute is limited to “individuals”, and that the district court correctly denied the employer’s motion for summary judgment.

            After further appeal, the Iowa Supreme Court noted that the Iowa Civil Rights Act defines “employer” to include “every other person employing employees within the state”. “Person” can be defined as a corporation, unless the context otherwise requires. The court stated that the legislature, broadly intending to protect family-owned small businesses, may have intended to exclude from the Iowa Civil Rights Act all businesses, incorporated or not, with fewer than four nonfamily-member employees. However, in analyzing the ordinary meaning of the statutory language, the court concluded that a corporate employer has no family members as employees. Thus, a corporate employer cannot qualify for the family-member exemption under the Iowa Civil Rights Act and may be held liable for discriminatory employment practices if it otherwise meets the statutory requirements.

            This opinion affects many family-owned businesses. Although the Iowa legislature may choose to change the language in the Iowa Civil Rights Act to clearly include corporations in the exemption, small businesses should consider the protections it may be losing by operating as a corporation.