Recent developments at I.C.E. - New No-Match Regulations....EXPECT IMPLEMENTATION AND ENFORCEMENT AGAINST EMPLOYERS IN 2008!

Immigration Enforcement Update For Employers: New Form I-9; Temporary Halt to No-Match Letters; New No-Match Regulation

My friends at Arent Fox have this update for all construction industry folks:

1. U.S. Citizen and Immigration Services (USCIS) recently amended Form I-9 (Employment Eligibility Verification). Employers are required to use Form I-9 to verify the identity and employment authorization of newly hired employees. As of November 7, 2007, the amended Form I-9 is the only valid version of the form. Starting December 26, 2007 -- after an informal grace period -- employers who fail to use the new Form I-9 may be subject to all applicable penalties under section 274A of the Immigration and Naturalization Act, 8 U.S.C. 1324a, as enforced by the Department of Homeland Security through its immigration arm of U.S. Immigration and Customs Enforcement (ICE). To identify the amended Form I-9, look for the following printed in the lower right-hand corner: (Rev. 06/05/07). Employers do not need to complete an amended Form I-9 for those current employees who have properly completed the old Form I-9, provided the form is maintained on file.

2. The Social Security Administration (SSA) announced on November 13, 2007 that it will not be sending out No-Match letters to employers this year because of the preliminary injunction blocking implementation of DHS's new No-Match regulation. This decision, however, does not mean that that there will be a halt to DHS's increased worksite enforcement efforts. Although the preliminary injunction has deprived DHS of one of its enforcement tools, DHS was able to increase significantly its enforcement efforts in the past five years without the benefit of this regulation, and intends to continue its enforcement initiatives in the future. The next round of No-Match letters will probably come in the spring of 2008.

3. In the meantime, DHS has announced that it intends to issue a new No-Match regulation that satisfies the concerns of the federal judge who ordered the preliminary injunction. In addition to rewriting the rule, DHS also plans to conduct a small-business survey of the rule's impact on small business. The government expects to complete the survey and rewrite the rule by March 24, 2008.

In summary folks, there is a delay to the much anticipated but not appreciated implementation of the no-match rule...expect criminal enforcement of these rules against employers to pick up in the second quarter of 2008!

The on-going saga of Social Security cards, general contractors and the steps employers must take to preserve individual rights....the I.C.E. inititiatives

A subcontractor indicated to me that general contractors were pushing the subs to have Social Security cards in the possession of each employee of the subcontractor as the general contractor wanted to post them at the jobsite.

As Dave Wing of Spencer Fane acknowledges, an employer cannot require an employee to produce a social security card. If the employee has any of the various documents required for I-9 compliance and the documents appear to be real, the employer must accept them. A general who requires more than this would be requiring that the sub violate the law and probably would be violating the law itself by imposing that requirement. Moreover, posting SSNs at the jobsite is an open invitation to identity theft and in violation of Missouri law limiting the employer's use and disclosure of employee SSNs.

Folks, it is a real dilemma here in the Midwest to try to figure out how to deal with the immigration employment problem.   

The continuing erosion of the independent contractor in Missouri

Note this case.....as it would appear the Courts in Missouri will bend over backwards to find an employee relationship where ever an independent contractos supposedly exists....however, as Dave Wing of Spence Fane tells me, independent contracting still exists but this case will cause you to look closely at how to structure such an arrangement going forward....

Kansas City Business Journal - by Steve Vockrodt Staff Writer

Both sides of a seemingly minor employment case emerged on the losing end of a Missouri Supreme Court ruling handed down Tuesday.

In a labyrinthine 7-0 decision, judges ruled that workers for a Kansas City housecleaning business were not independent contractors as the company's owner suggested but rather more closely fit the classification of an employee, which then requires the employer to pay employment taxes.

The Missouri Division of Employment Security had argued that workers at Jenny's Housecleaning Inc. were not independent contractors in part because they received instructions and training from the company and were provided with company shirts and cleaning supplies. The company also determined which jobs the workers would do.

The Supreme Court sided with the position of the DES. But the ruling amounted to a Trojan horse for the DES.

Here's why: For years, the DES has sent administrative and managerial employees -- not attorneys -- to represent the department in employment securities hearings before the Labor and Industrial Relations Commission.

The DES has gotten by with the practice with no objection from companies appealing their decisions.

In this case, however, the owner of Jenny's Housecleaning, Mary Jeanette Haggard, suggested that the labor commission's decision in favor of the DES was null and void because the DES wasn't represented by an attorney.

The DES responded that the department didn't need attorneys for such hearings because of a Supreme Court rule that says businesses and corporations can be represented by managers in employment security hearings.

In other words, the DES, a state government department, was holding itself out as a business entity.

The court didn't buy that argument, which now means that the DES must have attorneys present at employment security hearings.

In its brief to the supreme court, the DES roiled at the possibility that it now would have to hire attorneys to cover the thousands of hearings the department is part of, claiming it "create(s) an enormous burden on the operations of all governmental entities, as it would apply not only to the (DES) but to employers which include, but are not limited to, school districts, fire districts, sewer districts and local municipalities of any size."

Nevertheless, it appears the DES is ready to face that reality.

"It will cause us to use our internal resources," said Wanda Seeney, a spokeswoman for the Missouri Department of Labor and Industrial Relations.

Seeney added that she's not sure how this ruling would affect other government entities.

The twist in the Jenny's Housecleaning case was that even though the DES didn't have an attorney at its hearing, the court refused to throw out the labor commission's ruling in favor of the DES because representatives for Jenny's Housecleaning failed to raise the objection at the time of the ruling.

Joel Krieger, a Wallace Saunders Austin Brown & Enochs Chtd. lawyer representing Haggard, said he didn't object because the DES usually doesn't have attorneys present for the hearings.

Nevertheless, Krieger said he's not sure why the court would rule that the DES should have had an attorney at the hearing but then accept that hearing's results.

"I think a proceeding where nonlawyers are involved, all of them should be null and void," Krieger said.

He added that he and his client disagree with the ruling about Jenny's Housecleaning's employees but that they weren't sure what they would do next.

svockrodt@bizjournals.com | 816-421-5900

All contents of this site © American City Business Journals Inc. All rights reserved.

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This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.

Opinion
Supreme Court of Missouri

Case Style: Mary Jeanette Haggard d/b/a Jenny's Housecleaning, and Jenny's Housecleaning, Inc., Appellants, v. Division of Employment Security, Respondent.

Case Number: SC88577

Handdown Date: 11/20/2007

Appeal From: Appeal from a Decision of the Labor and Industrial Relations Commission

Counsel for Appellant: Joel I. Krieger

Counsel for Respondent: Marilyn Green and James R. Layton

Opinion Summary:


This summary is not part of the opinion of the Court. It has been prepared by the Communications Counsel for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court and should not be quoted or cited. The opinion of the Court, which may be quoted, follows the summary.

Overview: This case involves a business owner's challenge to the Labor and Industrial Relations Commission's decision that her workers were "employees" for purposes of employment security law. In a 7-0 decision, the Supreme Court affirmed the commission's decision. The fact that the Division of Employment Security was represented at the hearing by a non-lawyer employee does not affect the commission's jurisdiction. Further, because the business owner failed to object to the employee's non-lawyer status during the hearing, she waived the issue, and as such, it does not render the commission's decision void. The hearing tribunal referee acted properly in questioning witnesses and obtaining documents for review before deciding the case, and the evidence supported the commission's decision that the workers were employees and not independent contractors.

Facts: Mary Jeanette Haggard owns a residential housecleaning service and engages others to clean houses for the business. In 2005, the Missouri Division of Employment Security determined that the monies Haggard paid her workers were "wages" covered by the state's employment security law and that, as such, Haggard was required to pay employment taxes. Haggard appealed to the division's appeals tribunal, where she appeared by counsel and the division was represented by a non-lawyer managerial employee. The appeals tribunal affirmed the division's decision, as did the Missouri Labor and Industrial Relations Commission on further appeal. Haggard seeks review of the commission's decision.

AFFIRMED.

Court en banc holds: (1) The fact that the division was represented by an employee who was not an attorney does not affect the commission's jurisdiction and does not render the commission's decision void. Neither the division nor Haggard objected to the employee's non-lawyer status during the hearing, and Haggard only raised it as an issue when she sought review of the commission's decision. As such, she waived the issue. Further, it was Haggard's counsel, not a non-lawyer representing the division, who filed the application for review with the commission. Nonetheless, the non-lawyer employee should not have represented the division at the hearing. This Court regulates the practice of law, and the legislature has provided penalties for unauthorized practice of law. "Practice of law" is defined in part as appearing as an advocate in a representative capacity in proceedings before any board or commission constituted by law or authorized by law to settle controversies. Reed v. Labor and Indus. Relations Comm'n, 789 S.W.2d 19, 20 (Mo. banc 1990); see also section 484.010, RSMo 2000. One cannot consent to the unauthorized practice of law, and the protections of section 484.010 cannot be waived. In Rule 5.29(c), this Court carved out an exception for representation in employment security proceedings, permitting "a corporation, partnership or other business entity authorized by law" to be represented by an officer or managerial employee of the entity. The division is not a business entity authorized by law -- it is a state agency. As such, it is not entitled to be represented by a non-lawyer employee under Rule 5.29(c) at any of its proceedings. To the extent that Reed suggests that a judgment is null and void solely because a party to the decision was represented by a non-lawyer, it should not be followed any longer. Further, parties may not agree to waive representation by a lawyer when such representation would violate Rule 5.29.

(2) The evidence supports the commission's decision that Haggard's workers were her employees and not independent contractors. The division's witness made no judicial admissions that should be attributed to the division to find that Haggard's workers were independent contractors. In determining whether a worker is an employee or independent contractor pursuant to section 288.034.5, RSMo 2000, and 8 CSR 10-4.150(1), it considers 20 factors derived from federal law to determine whether sufficient control is present to establish an employer-employee relationship. Here, the division presented ample evidence in support of its findings that 10 of the 20 factors indicated an employee-employer relationship, six factors indicated an independent contractor status and four factors were neutral.

(3) The hearing tribunal referee acted properly in questioning witnesses and obtaining documents for review before deciding Haggard's case. The referee is required to ensure that the facts of a case are developed sufficiently to make a decision on the issues. Haggard's assertions to the contrary are without merit.

Citation:

Opinion Author: Mary R. Russell, Judge

Opinion Vote: AFFIRMED. Stith, C.J., Price, Teitelman, Limbaugh and Wolff, JJ., and House, Sp.J., concur. Breckenridge,J.,
not participating

Opinion:

This slip opinion is subject to modification until the Court has ruled on the parties' motions for rehearing, if any, and will become final only after the Court issues its mandate. To see when the Court issues its mandate, please check the docket entries for the case on Case.net.

Mary Jeanette Haggard, doing business as Jenny's Housecleaning and Jenny's Housecleaning, Inc. (collectively "Haggard"), appeals the decision of the Labor and Industrial Relations Commission ("LIRC") finding that her workers were employees who were paid "wages" under Missouri employment security law. This Court took transfer of the case after opinion by the court of appeals. Mo. Const. art. V, sec. 10. The question before this Court is whether DES's representation by a non-lawyer in its employment security proceedings violates Rule 5.29(c) and voids the decision. Although this Court finds that DES was improperly represented, there is no error in the LIRC's decision and it is affirmed.

I. Background

Haggard owns a residential housecleaning service. She engages others to work in the business as house cleaners. In 2005, the Division of Employment Security ("DES") determined that the monies Haggard paid her workers in performance of cleaning services were "wages" covered by Missouri's employment security law.(FN1) As such, the DES determined that Haggard was subject to payment of employment taxes. Haggard appealed to DES's appeals tribunal, where she appeared with counsel. DES was represented in the appeal by a non-lawyer managerial employee. The appeals tribunal affirmed DES's decision, and Haggard appealed to the LIRC. The LIRC affirmed, and Haggard seeks review of its decision.

II. Standard of Review

Article V, section 18 provides for judicial review of the LIRC's decision to determine if it is "supported by competent and substantial evidence upon the whole record." Section 288.210, RSMo 2000,(FN2) provides for judicial review of employment security decisions and states in relevant part:

The findings of the commission as to the facts, if supported by competent and substantial evidence and in the absence of fraud, shall be conclusive, and the jurisdiction of the appellate court shall be confined to questions of law. The court, on appeal, may modify, reverse, remand for rehearing, or set aside the decision of the commission on the following grounds and no other:

(1) That the commission acted without or in excess of its powers;

(2) That the decision was procured by fraud;

(3) That the facts found by the commission do not support the award; or

(4) That there was no sufficient competent evidence in the record to warrant the making of the award.

Section 288.210.

III. Was DES required to be represented by an attorney?

Initially, Haggard maintains that the LIRC erred in affirming the DES appeals tribunal's decision because DES was improperly represented by a non-lawyer managerial employee. She argues that this DES employee violated the prohibition against the unauthorized practice of law when he asked questions of witnesses and made a closing statement on DES's behalf. She contends that DES was required to be represented by a lawyer because it is not the type of entity to which Rule 5.29(c) provides an exception for the unauthorized practice of law. She asserts that the tribunal's decision is void and should be set aside because DES was improperly represented.

A. Preventing the Unauthorized Practice of Law

This Court regulates the practice of law and, although the General Assembly cannot interfere with this Court's power to determine what is the unauthorized practice of law, the legislature has provided penalties for acts determined to be the unauthorized practice of law. Reed v. Labor and Indus. Relations Comm'n, 789 S.W.2d 19, 20 (Mo. banc 1990); see section 484.010.(FN3) This Court has said:

One is engaged in the practice of law when he, for a valuable consideration appears in a representative capacity as an advocate in proceedings pending or prospective, before any court, commissioner, referee, board, body, committee, or commission constituted by law or authorized to settle controversies, and there, in such representative capacity, performs any act or acts for the purpose of obtaining or defending the rights of their clients under the law.

Reed, 789 S.W.2d at 21 (internal citations omitted).

The unauthorized practice of law is prohibited so that the public is protected for provision of services deemed to require special fitness and training by those not having needed legal qualifications. Bray v. Brooks, 41 S.W.3d 7, 13 (Mo. App. 2001). One cannot consent to the unauthorized practice of law, such that there can be no waiver of protections of section 484.010. See id.

B. DES must be represented by counsel before its appeals tribunal

This Court promulgated Rule 5.29 to address the unauthorized practice of law, but carved out an exception for representation in employment security proceedings. Rule 5.29(c) provides:

In any employment security proceeding before the state division of employment security, a corporation, partnership or other business entity authorized by law may be represented by an officer of the entity or a person in the full time employment of the entity in a managerial capacity who shall be afforded the opportunity to participate in the proceeding.

Rule 5.29(c).(FN4)

At issue in Haggard's case is whether DES is included under Rule 5.29(c)'s exception permitting non-lawyer representation in employment security proceedings. DES contends that it may be considered a "business entity" under Rule 5.29(c), such that it need not be represented by legal counsel in its employment security cases. It asserts that it has been effectively represented by non-lawyer managerial employees for many years.

The express language of Rule 5.29(c) provides an exception for only a "corporation, partnership or other business entity authorized by law." DES is not a "business entity authorized by law"--it is a state agency. As such, DES is not entitled to be represented by a non-lawyer employee pursuant to Rule 5.29(c) at any of its proceedings.(FN5)

C. Failure to object to use of non-attorney

The parties disagree what effect DES's lack of attorney representation has on Haggard's case. Haggard asserts that the LIRC was without jurisdiction and its decision was void under Reed because DES was not represented by counsel before the appeals tribunal. DES maintains that the LIRC's jurisdiction was not defeated because DES was represented by a non-lawyer.

In Reed, this Court held that a corporation was required to be represented by an attorney in an unemployment compensation benefits case before the LIRC. 789 S.W.2d at 23. This Court stated that matters pending at the time the Reed opinion was issued would be unaffected, but new filings that were filed by non-attorneys would be considered untimely filed and null and void. Id. Reed opined that the LIRC should have rejected any applications for review by non-lawyers. Id. at 23-24. This Court's decision in Reed was followed by the promulgation of Rule 5.29(c), such that corporations may now be represented by non-lawyers in employment security matters.

This case is distinguishable from Reed because the application for review in this case was filed by Haggard's counsel, not by the party who was represented by a non-lawyer. Even were that not the case, however, this Court is not persuaded by Haggard's assertions that the LIRC's decision is null and void pursuant to Reed. This Court rejects any interpretation of Reed that suggests DES's failure to comply with Rule 5.29(c) is a jurisdictional issue. To the extent that Reed suggests that a judgment is null and void solely because a party to the decision was represented by a non-lawyer, it is no longer to be followed. Contrary to Haggard's assertions, nothing mandates dismissal of this action because DES was improperly represented by a non-lawyer unless the error was raised and preserved.

During her hearing, Haggard made no objection to DES's representation by its non-lawyer managerial employee. Haggard's counsel only raised concerns that the DES employee would serve as DES's representative at the hearing as well as its chief witness. Haggard did not raise the issue of the employee's non-lawyer status until she sought judicial review of the LIRC's decision. Her failure to object at the time of the hearing waived this issue.(FN6) She is not entitled to relief in her employment security case because DES was not properly represented.

Haggard also cites to Bray, 41 S.W.3d at 13, for the proposition that the unauthorized practice of law is not subject to waiver, consent, or lack of objection by the victim. The objection in this case, however, is not from the victim. DES claims it is unaffected by its failure to have a lawyer at Haggard's hearing. Consequently, in this case there are not concerns about undermining the purposes behind the prohibitions against the unauthorized practice of law. In any event, since representation by one not authorized to practice law is not jurisdictional and does not render a decision void, if it is not raised and preserved, it is waived.

IV. Was the LIRC's decision supported by competent and substantial evidence?

Haggard argues that the LIRC erred in finding that her workers were employees and not independent contractors.

Section 288.034.5, RSMo Supp. 2006, provides:

Service performed by an individual for remuneration shall be deemed to be employment subject to [Missouri's employment security] law unless it is shown to the satisfaction of the division that such services were performed by an independent contractor. In determining the existence of the independent contractor relationship, the common law of agency right to control shall be applied. The common law of agency right to control test shall include but not be limited to: if the alleged employer retains the right to control the manner and means by which the results are to be accomplished, the individual who performs the service is an employee. If only the results are controlled, the individual performing the service is an independent contractor.

Haggard complains that the LIRC ignored "admissions" by DES's witness that support her arguments that her workers are independent contractors. Haggard highlights many of the witness's responses that followed questions by Haggard's counsel about whether workers could be classified as independent contractors if certain factors were considered. For example, Haggard's counsel suggested that if the workers were untrained "that militates work as an independent contractor" and DES's witness responded, "Yes." This Court's review of the testimony reveals that DES's witness made no judicial admissions that should be attributed to DES to find that Haggard's workers were independent contractors.

DES determines whether a worker is an employee or an independent contractor pursuant to 8 CSR 10-4.150(1) and section 288.034.5. It considers 20 factors derived from federal law to determine whether sufficient control is present to establish an employer-employee relationship. See K & D Auto Body, Inc. v. DES, 171 S.W.3d 100, 105 (Mo. App. 2005).(FN7) Utilizing these factors, the evidence that Haggard's workers were her employees included: she provided the workers instructions and training;(FN8) the workers' services were integrated into her business operations; she determined what jobs the workers would do; and she provided the workers company t-shirts and cleaning supplies. DES found that ten of the 20 factors it considers indicated an employer/employee relationship, six factors indicated an independent contractor status, and four factors were neutral.

There is no magic formula for determining how many factors must weigh in favor of an employee relationship. K & D, 171 S.W.3d at 106.(FN9) The question for this Court is whether there was substantial evidence to support the LIRC's finding that the workers were Haggard's employees. DES presented ample evidence in support of its position that the workers were Haggard's employees. This Court finds the LIRC's decision was supported by the evidence and will not disturb its findings.

V. Did the appeals referee act impermissibly?

Haggard argues that the appeals tribunal referee acted beyond the scope of an impartial judge by asking questions of witnesses and seeking admission of documents.

The hearing officer must ensure that the facts of the case are sufficiently developed to make a decision on the issues. See Smith v. LIRC, 656 S.W.2d 812, 818-19 (Mo. App. 1983). 8 CSR 10-5.015(10)(A) provides, in relevant part: "The hearing officer shall review the issues presented and set forth the procedures to be followed during the hearing. . . . The hearing officer may examine all parties and witnesses and shall determine the order of testimony and procedure for each hearing."

The hearing tribunal referee acted properly in questioning witnesses and obtaining documents for review before deciding Haggard's case. Haggard's assertions to the contrary are without merit.

VI. Conclusion

Finding no error, the LIRC's decision is affirmed.

Footnotes:

FN1. The DES issued Haggard two separate decisions, one relating to monies paid before her business was incorporated and one relating to payments made post-incorporation. These decisions were considered together on appeal, and this Court similarly considers the decisions as consolidated.

FN2. Unless otherwise indicated, all statutory references in this opinion are to RSMo 2000.

FN3. Section 484.010 reads:

1. The “practice of the law” is hereby defined to be and is the appearance as an advocate in a representative capacity or the drawing of papers, pleadings or documents or the performance of any act in such capacity in connection with proceedings pending or prospective before any court of record, commissioner, referee or any body, board, committee or commission constituted by law or having authority to settle controversies.

2. The “law business” is hereby defined to be and is the advising or counseling for a valuable consideration of any person, firm, association, or corporation as to any secular law or the drawing or the procuring of or assisting in the drawing for a valuable consideration of any paper, document or instrument affecting or relating to secular rights or the doing of any act for a valuable consideration in a representative capacity, obtaining or tending to obtain or securing or tending to secure for any person, firm, association or corporation any property or property rights whatsoever.

FN4. Similarly, Rule 5.29(b) provides that individuals in employment security matters may be self-represented or represented by "a duly authorized agent."

FN5. While DES is not entitled to the exemptions provided in section 5.29(c), nothing prevents a DES non-lawyer employee from participating in an employment security matter to the extent that participation does not constitute acts within the definition of the "practice of law." See section 484.010.1.

FN6. Nothing in this opinion should be read to permit parties to agree to waive representation by a lawyer when such representation would be a violation of Rule 5.29.

FN7. These factors include: (1) instructions; (2) training; (3) integration; (4) services rendered personally; (5) hiring, supervising, and paying assistants; (6) continuing relationship; (7) set hours of work; (8) full time required; (9) doing work on employer's premises; (10) order or sequence set; (11) oral or written reports; (12) payment by hour, week, month; (13) payment of business and/or traveling expenses; (14) furnishing of tools and materials; (15) significant investment; (16) realization of profit or loss; (17) working for more than one firm at a time; (18) making service available to general public; (19) right to discharge; and (20) right to terminate.

K & D, 171 S.W.3d at 105 (internal citations omitted).

FN8. Haggard argues at length that her workers were not her employees because she did not control their work performance, but instead only inspected the results of their work. These assertions are undermined by evidence showing that Haggard developed at least two documents outlining instructions for workers to follow when cleaning for her. The instructions included details like what cleaning supplies should be utilized and where they should be used, the frequency for cleaning doors and baseboards, how lunch breaks should be taken, and topics not to discuss with customers.

FN9. K&D states:

The factors are not intended to serve as a bright-line rule with no flexibility, but rather they are indices of control to assist the employer in attempting, for tax purposes, to determine the common law employment status of its workers. Not every factor is applicable in every situation, and each case is decided on the basis of its own facts. The degree of importance attached to each factor varies depending on the type of work and individual circumstances, and the relevant factors should be considered in inquiring about employment status with no one factor being decisive.

171 S.W.3d at 106 (internal citations omitted).

Separate Opinion:
None


This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.

Social Security Mis-Matched Number Controversy involving construction companies

Well it appears the much dreaded mis-matched numbers issues has been slowed a bit by the fed.'s As you may know I.C.E. is interested in prosecuting employers who hire illegal aliens. The process to initiate this massive effort is to send out "no-match letters" and the common wisdom was the letters would be sent shortly.

However according to a recent publication:

"The Social Security Administration will not be sending out no-match letters to employers this year because of the lawsuit challenging the Homeland Security Department's worksite enforcement regulations, an SSA spokesman told BNA Nov. 13.

The decision not to send out the letters based on 2006 tax year data means SSA is not likely to send out any letters until at least spring of 2008, SSA spokesman Mark Hinkle said. By not sending out the letters and waiting until 2008, Hinkle said SSA will not have issued any employer no-match letters during 2007.

A federal judge in California Oct. 10 granted a preliminary injunction barring SSA from sending out the no-match letters because for the first time the letters were to include language threatening possible immigration law criminal and civil liability for employers that failed to respond to the letters (196 DLR AA-1, 10/11/07 ).

"Because of the lawsuit, we needed to revise letters and it became apparent it was getting too late in the year to send them out," Hinkle explained Nov. 13, adding that employers and SSA were already gearing up to focus on wage reporting for 2007.

For the moment you need not look into your mailboxes. However, I.C.E. is still prosecuting employers so do not be mislead as to the seriousness of the law and the governments attempt to enforce the same!

What is e-discovery and why should contractors know anything about it?

Well, whether we like it or not in ANY litigation you should know that the opposing counsel can now delve into your company...any computer in your company. Obviously there can be a significant amount of information you do not want to share. So how do you deal with these issues in advance? Ask your self these questions:

1.  Do you know where your e-mail is stored and for how long?   Have you talked to your IT department about where all of your electronically stored information can be found?  Have you determined whether you have data that is not reasonably accessible?

2.  What efforts have you made to audit or test the security of your systems?  Have you actually implemented a litigation hold to see if it works?

3.  Do you provide your employees with training about the appropriate uses of e-mail?

If you are not sure what the answers are to these questions, call an attorney...you will save yourself a serious amount of money in legal fees, expert fees and the like in ANY litigation matter!

Why it is important to carefully consider and word indemnity agreements....A Kansas case

Note the language set out below and how the Court ruled Otis would not be liable.....

Indemnity Contract Not Ambiguous

Agreement Clearly Expressed Intent to Exculpate
Otis Elevator Co. v. Midland Red Oak Realty, Inc., 483 F.3d 1095 (C.A. 10, April 24, 2007)

Otis Elevator Co. (“Otis”) brought suit seeking contractual indemnity from Knox Glass Company (“Knox”) and MRO Southwest (“MRO”) for a settlement which Otis paid for personal injuries sustained by a Knox employee while moving a large piece of glass on the top of an elevator car.

Knox was scheduled to deliver a large thin piece of glass to a tenant in a building owned by MRO. Otis was called to assist with the move.  Prior to attempting the move, four Knox employees (including the one injured), an MRO employee, and the building’s Chief of Security signed a Repair Order which stated: “The undersigned hereby assumes complete responsibility for, and agrees to indemnify and save harmless Otis Elevator Company, its agents and employees from any and all damages or claims for damages for which they or any of them may sustain by reason of injury or death to persons or damage to property growing out of or connected with the performance of the work under this order whether caused by the negligence of Otis Elevator Company, its agents or employees or otherwise.” (Emphasis added)

During the move of the glass, the glass broke and one of the Knox employees (Atkinson) was injured. Atkinson sued Otis, and a settlement was reached in the amount of $425,000. Otis continually sent letters to both Knox and MRO demanding indemnity and tendering its defense. Finally, Otis filed the instant lawsuit against Knox and MRO.

The District Court interpreted the indemnity agreement and held that “work under this order” meant repair work and not an elevator car top move.  The District Court ruled in favor of Knox and MRO; Otis appealed.

The Tenth Circuit first noted that an agreement indemnifying one from its own negligence must meet three conditions: (1) the parties must express their intent to exculpate in unequivocally clear language; (2) the agreement must result from an arm’s length transaction between parties of equal bargaining power; and (3) the exculpation must not violate public policy.  The first of the conditions was at issue.

The Court of Appeals held that the indemnity agreement was not rendered unenforceable by failing to describe the “work under this order” to which indemnity applied, because although an indemnification agreement must clearly and unequivocally express an intent to exculpate the indemnitee for its own acts, it need not specifically set out those acts. Thus, it is the intent to exculpate a party for its own negligence which must be clear and unambiguous, not the acts of negligence.  The Tenth Circuit held that the indemnity provision in this case was sufficient because it clearly and unambiguously exculpated Otis.

Supplier Delays and the liquidated damages - why force majeure claues should never be overlooked

From my state....and I do not know why the contractor thought a supplier's delay would be an act of God.....maybe it is somewhere else but not Kansas!

Force Majeure Clause Does Not Cover Supplier Delays

Liquidated Damages Provision Enforced
Hutton Contracting Company, Inc. v. City of Coffeyville, 487 F.3d 772 (C.A. 10, Apr. 30, 2007)

Hutton Contracting Company, Inc. (“Hutton”) contracted to construct a power line and a fiber-optic line for the City of Coffeyville, Kansas (“the City”).  Upon completion of the project, the City refused to pay the final $110,159.47, claiming that it was entitled to offsets against most of that amount for contractual liquidated damages because of Hutton’s delays.  Hutton sued to obtain the unpaid amount of the contract price.

The contract provided that the construction must be completed within 45 days of the commencement date, and also that time was of the essence. The contract further provided that the commencement date would be determined by agreement of the parties, but must be no later than May 1, 2000.  The contract provided exceptions for the completion deadline in cases of bad weather or exceptional circumstances (the force-majeure clause).

The force-majeure clause stated that the time for completion would be extended for the period of any reasonable delay due exclusively to causes beyond the control and without the fault of Hutton. The contract also provided that the amount owed to Hutton would be reduced by $500 in liquidated damages for each day of unexcused delay.

Hutton completed the project much later than the due date, because of delays in the delivery of supplies, and the delivery of some defective supplies. Hutton submitted requests for extensions because of the late supply deliveries and because of weather conditions. The extensions were not granted, and the City notified Hutton that it would retain the balance due of $110,159.47 for delays. Hutton suit, claimed that it had performed all of this duties under the contract and was entitled to the full contract price.

The District Court held that the contract’s force-majeure clause did not excuse the delays caused by the problems with the delivery of supplies, because the supplier’s tardiness did not qualify as extraordinary or beyond the control or fault of the Hutton, as the contract contemplated. The supplier was Hutton’s subcontractor, and Hutton’s responsibility.  The District Court also held that the liquidated damages provision was enforceable.  The District Court upheld a setoff for liquidated damages for 171 days, or $85,500, and thus awarded Hutton $110,159.47 minus that amount.

On appeal, the Tenth Circuit agreed that Hutton was responsible to the City for its supplier’s delays, when those delays were not themselves excused by a force majeure, and that the force majeure clause did not of itself relieve Hutton of responsibility for delays caused by its supplier under the contract.

The Tenth Circuit also agreed that the liquidated damages clause was reasonable. The Court noted that the City suffered $76,000 in lost revenue, close enough to $85,000. The District Court judgment was affirmed.