Morgan Hinckley has joined Underberg & Kessler LLP as a law clerk in our Rochester, New York office. She's currently assisting the real estate practice group, helping with commercial and residential transactions.  She earned her B.S. from Clarkson University in 2016, and her J.D. from Syracuse University College of Law in 2019. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

I am graduating from my residency program and received an employment contract from my future employer. What should I be aware of while reviewing the proposed agreement? Unfortunately, how to review and negotiate a physician employment contract is not usually covered in the hustle and bustle of residency or fellowship. Yet, the physician employment contract defines the parameters of your relationship with your employer during your employment, and even after it ends. Making sure you understand the terms of your employment agreement prior to signing on the dotted line is crucial for any new (or experienced) physician. Compensation is usually the first question on a new attending’s mind. Research what other physicians in your specialty and geographic location earn and use that knowledge to ensure that your new employer is offering market rate. Additionally, negotiating productivity incentives may be possible because your employer’s profits will rise as your productivity increases. Make sure to review the practice’s fringe benefits such as health insurance, disability insurance, and retirement savings options, as these benefits contribute to your overall compensation. Quality of life issues are another important component of any physician employment contract. Carefully review the call schedule. The agreement should state whether call will be taken evenly by the physicians in the practice and how call will be handled during absences. If there are multiple locations for the practice, expectations about covering farflung offices should be addressed, as well as travel expenses. Prior to entering into a contract, it is always beneficial to ask about how the practice operates, its billing procedures and employee retention rates. The physician employment contract should also specifically set forth the duties of the physician, including clinical responsibilities, administrative tasks and teaching responsibilities. The agreement should delineate the responsibilities of the employer, such as keeping malpractice insurance, maintaining appropriate support staff and ensuring standards for medical care. Non-competition and non-solicitation terms are now common in physician employment agreements. Depending on your practice, separating from your employer may mean having to move to continue working. In New York, these restrictive covenants are enforceable if they are reasonable in time and distance. For example, in a town with two hospitals, a hospitalist who leaves her position will likely be unable to work for the competing health system for two to three years. This means relocating or enduring a long commute. Restrictive covenants are the most litigated terms of physician employment contracts. Ensuring that you understand any restrictive provisions of your contract and negotiating a reasonable time and distance are essential to avoiding costly litigation should you separate from this practice and want to continue working in this community. Finally, understanding how you or your employer may terminate the physician employment agreement is also critically important. Physician contracts usually recite a definite term of employment; but give either party the ability to terminate the agreement on written notice (usually 60 – 90 days). The best protection for job security— and the hardest to achieve—is a fixed term contract allowing termination only “for cause”, which is clearly defined. Additionally, the employment agreement should give the physician an opportunity to cure any alleged shortcomings before termination upon prior written notice. The transition from a resident or fellow to an attending is an exciting and gratifying time. Taking the opportunity to understand and negotiate your employment agreement should not be missed. If you have questions concerning the content of your employment contract, you should contact an attorney experienced in negotiating and understanding these special agreements. Download the Reprint from the May/June 2018 Edition of 'The Bulletin' by MCMS As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Last week the Consumer Financial Protection Bureau (CFPB) issued a Notice of Proposed Rulemaking to implement the Fair Debt Collection Practices Act (FDCPA). These proposed changes could have a dramatic effect on attorneys representing consumers and debt collectors. The FDCPA governs debt collectors’ conduct and communication with consumers. Attorneys attempting to collect a debt incurred primarily for personal, family or household purposes are considered debt collectors under the FDCPA. Debt incurred for corporate, business or agricultural purposes is not entitled to the protections of the FDCPA. The FDCPA was passed in 1977 to provide protection to consumers from abusive, deceptive and unfair collection practices. However, Congress did not delegate the authority to issue substantive rules to interpret the FDCPA until the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The CFPB developed the proposed rules to modernize the legal regime and clarify how debt collectors may lawfully communicate with debtors using technologies — such as voicemail, email and text messaging — that have evolved since the 1970s. The proposed rules are designed to provide consumers with well-defined options to dispute debts and debt collectors with clear rules regarding contact with consumers. Below is a list of several changes proposed by the CFPB: Decedents and their representatives are consumers: The proposed rules clarify that the definition of a consumer includes deceased consumers and their executors, administrators and personal representatives. The rules also seek to clarify how a collector may communicate with the personal representative of a deceased consumer. Clear limits on call attempts and conversations: The CFPB’s proposal limits the number of attempts to contact consumers by telephone to seven calls per week. Once a debt collector reaches a consumer, the debt collector must wait at least one week before attempting to reach the consumer again. Additional consumer protections in verification notices: In addition to the disclosures already required, debt collectors will be required to provide an itemization of the debt and plain-language information about how to dispute the debt. Under the proposed rules, demand letters must include a “tear-off ” that consumers can return to the debt collector in response to the collection attempt. Updated communications with consumers: The proposed rules attempt to clarify how debt collectors may use technologies developed since the FDCPA’s enactment. For example, it seeks to clarify a collector’s ability to leave a limited content message on a consumer’s voicemail with a third party who answers the telephone or by text message without risking a FDCPA violation. The proposed rules also clarify the requirements for communicating with consumers via email. This includes complying with the Electronic Signatures in Global and National Commerce Act (E-SIGN Act) and providing consumers with the ability to opt-out or unsubscribe from future electronic communications. Debt collectors are also prohibited from contacting a consumer using an email address provided by the consumer’s employer or through social media, except through a private messaging function. Debt collectors must refrain from communicating with a consumer in a way the consumer has requested not to be contacted. For example, if a consumer asks a debt collector not to contact him at a specific address or telephone number, the debt collector must refrain from using that address or telephone number. No threats on time-barred debt: The proposed rules prohibit debt collectors from suing, or threatening to sue, on debt that is past the statute of limitations. Limitations of reporting debt to a consumer reporting agency: The proposed rules prohibit debt collectors from providing debt information to a consumer reporting agency prior to communicating with the consumer about the debt. Here, communication includes sending a validation notice to the consumer, but not leaving the consumer a limited-content message. No transfer or sale of debt discharged in bankruptcy: Under the proposed rules, debt collectors are prohibited from selling, transferring, or placing debts for collection if the debt collector knows, or should know, that the debt has been discharged in bankruptcy, or is the subject of an identity theft report. In addition to the clarifications set forth for both consumers and debt collectors, in the proposed rules, the CFPB has published a proposed model form Validation Notice, Model Form B-3. Use of the Model Form complies with the disclosure requirements set forth in the FDCPA and proposed rules. The Model Form can be found at: https://files.consumerfinance.gov/f/documents/cfpb_ debt-collection-validation- notice.pdf. The proposed rules can be found at: https://www.consumerfinance.gov/ documents/7622/cfpb_debt-collection-NPRM.pdf. Practitioners representing consumers and creditors should review and provide comment to the CFPB on the proposed rules, as their implementation will have a lasting impact on future practice. Download the Reprint from The Daily Record As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

On June 14, 2019, Governor Andrew Cuomo signed into law the “Housing Stability and Tenant Protection Act of 2019” (the “Tenant Protection Act”). The Tenant Protection Act, which contains a series of sweeping tenant favored regulations and protections, represents a staggering loss to residential landlords in New York State. While prior laws addressing rent regulation have been adopted in New York City and its surrounding counties, the Tenant Protection Act applies to every county in New York State. The Tenant Protection Act will increase the operating and organizational expenses of residential landlords. Landlords are now prohibited from collecting more than one month’s rent at lease commencement (GOL §7-108(1-a)(a)) or from charging an application fee (with the exception that landlords may charge up to $20.00 for a background and credit check) (RPL §238-a). Additionally, landlords are now obligated to immediately provide tenants with a written receipt of payment for any rent directly received in any form other than the personal check of the tenant, and to maintain such records for at least three years (RPL §265-e). The Tenant Protection Act will also drastically lengthen the process of eviction. Landlords must now send delinquent tenants a written notice, by certified mail, if the tenant’s rent has not been received within five days of the due date specified in the lease (RPL §§235-e(a) and (b)). The failure of any landlord to comply with this notice requirement will constitute an affirmative defense by the tenant in any subsequent eviction proceeding based on the non-payment of rent (RPL §235-e(d)). Additionally, the required written statutory demand providing delinquent tenants with an opportunity to cure their default has been increased from a three day cure period to a fourteen day cure period (RPAPL §711(2)). If the tenant fails to cure the arrearage and the landlord commences an eviction proceeding, the trial will not be scheduled until at least ten days after the petition has been served on the tenant (RPRPL §732(1)). The tenant now has the right to request, and the Court shall be obligated to grant, an adjournment of the trial for at least fourteen days (RPAPL §745). If the Court grants the landlord’s request for a warrant of eviction, the officer executing upon the warrant must provide the tenant with at least fourteen days’ prior written notice (an increase from the prior three day period), and the warrant may only be served on a business day (RPAPL §749). Upon application of the tenant, the Court, upon consideration of special circumstances, may grant a stay of the issuance of the warrant of eviction for a period of up to one year (an increase from the prior six month period) (RPAPL §753). Prudent investors operating in the New York real estate market should critically examine the capitalization rates on all prospective acquisitions of investment properties containing residential dwellings and verify that the economics account for the new increases in landlord operating costs anticipated to result from The Tenant Protection Act. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800. #nyslaw #realestatelaw

With the turn of the calendar to 2020, New York employers are now specifically prohibited from a various activity related to prospective employees’ wage or salary histories (New York Labor Law Section 194-A). (Prospective employees in the statute are defined to include current employees seeking a promotion). The New York Legislature determined that prospective employees’ wage or salary history knowledge often resulted in lower salaries at their new jobs. Accordingly, going forward prospective employers may not: Rely on a prospective employee’s wage or salary history to determine whether to offer the person a position; Orally or in writing seek or require wage or salary history from a prospective employee; Orally or in writing seek or require wage or salary history from the current or former employer of a prospective employee; Refuse to interview or hire a prospective employee (or retaliate against him/her) based on wage or salary history; Refuse to interview or hire a prospective employee (or retaliate against him/her) based on the non-provision of wage or salary history; Refuse to interview or hire a prospective employee (or retaliate against him/her) because the prospective employee filed a complaint with the Department of Law alleging a violation of Section 194-A. One exception to the general requirements of the new law is that if the prospective employee voluntarily discloses his or her wage or salary history at the time an offer of employment with compensation is made. The prospective employer may then verify that information with the prospective employee’s prior employer(s). An employee successfully bringing a civil claim for a violation of the new law will receive compensatory damages, as well as reasonable attorneys’ fees, and may also obtain injunctive relief ceasing the violation. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

SECURE ACT ENACTED On December 20, 2019, President Trump signed into law the Setting Every Up Community for Retirement Enhancement (SECURE) Act, which was incorporated into the Further Consolidated Appropriations Act. The SECURE Act makes significant changes to the tax rules applicable to qualified retirement plans and IRAs. Some of the key changes include: Deferring of the commencement of required minimum distributions until age seventy-two (72) Requiring payouts after the death of an account holder to be completed within ten (10) years of death, with some exceptions INCREASING THE REQUIRED MINIMUM DISTRIBUTION AGE — AND THE CONTRIBUTION AGE Previously, qualified account holders such as those with a 401(k) or IRA had to withdraw required minimum distributions (RMD) in the year they turned age 70.5. The SECURE Act increases that age to 72.  Further, the bill eliminates the maximum age for traditional IRA contributions, which was previously capped at 70.5 years old. Note Americans who turned 70.5 years old in 2019 will still need to withdraw their required minimum distributions this year, and failure to do so results in a 50% penalty of their RMD. People who are expected to turn 70.5 years old in 2020 will not be required to withdraw RMDs until they are 72. REPEAL OF STRETCH IRAS RMDs have changed for non-spousal account inheritors.  Under the old law, beneficiaries who did not inherit their accounts from a spouse were (in some cases) allowed to withdraw RMDs for the span of their lives.  The amount of the distribution is calculated based on various factors, including life expectancy and beneficiary age.  The SECURE Act now requires beneficiaries to withdraw all assets of an inherited account within ten (10) years. There are no RMDs within those ten (10) years, but the entire balance must be distributed after the tenth (10th) year. Note There are five classes of “eligible designated beneficiaries” who are exempt from the 10-year post-death payout rule and can still stretch RMDs over life expectancy. These include: Surviving Spouses Minor Children; however, it should be noted that an individual shall cease to be a minor child on the date the individual reaches majority, and any remainder of the portion of the individual’s interest shall be distributed within 10 years after such date. Disabled Individuals The Chronically Ill Beneficiaries not more than ten (10) years younger than the IRA owner. With the passage of the SECURE Act, it would be prudent for individuals to contact their estate planning counsel for the purpose of reviewing and possibly updating their estate planning strategy as it pertains to the dispositions and distributions of their retirement and IRA accounts and plans. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Last week, the United States Department of Labor issued its final rule allowing businesses to leave several “perks” out of the formula they use to calculate employee overtime pay, including tuition benefits, paid leave cash-outs and some bonuses.  The rule is meant to clear up uncertainty regarding what benefits and perks will be included in overtime calculations. The rule also excludes payments for unused paid leave, cellphone and travel reimbursement, the costs of parking benefits, wellness plans and gym access, and longevity bonuses and discretionary bonuses.  The DOL estimates that millions of dollars spent in litigating regular rate disputes will be saved by issuance of the new rule.  It is also expected that employers will be more willing to give employees additional perks if they know they won’t be subjected to lawsuits for unpaid overtime.  The rule becomes effective on January 15, 2020. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

There is no generally affirmative duty under New York law to disclose or not disclose information about disciplinary action against employees and ex-employees. Exceptions exist in the education, medical, childcare, police fields among others. Most private employers are free to choose what to disclose or not about disciplinary action. Regarding current employees, the best practice from a human resources perspective has been and continues to be that disciplinary information be kept to a relatively small number of other employees/managers that have a need to know about it. Considering former employees, the advice to and policy of most New York employers has been to give only the ex-employee’s dates of employment and last position held in order to avoid the risk of a defamation claim should something said about the disciplinary action turn out to be incorrect. This is even though defamation, defined as communicating false information about a person that injures the person, is a difficult claim to succeed on in New York. More specifically, defamation requires that a false statement be published (verbally or in writing) to a third party without any privilege or authorization, and that the publication causes damages. Moreover, New York has a qualified privilege allowing employers with an interest in common with the recipient (such as a prospective employer perhaps) to share honest information about ex-employees, including disciplinary action, even though the information may turn out later to be inaccurate. This qualified privilege requires that the employer disclosing the information do so in good faith and without actual malice. In the current “Me Too” climate regarding sexual harassment, some commentators and some employers have expressed the belief that disciplinary action against ex-employees for sexual harassment should be shared with prospective employers.  California reacted by passing a law specifically exempting reports of prior sexual harassment from possible defamation liability. New York has not done so to date. So, the answer to the question of “Can an employer disclose disciplinary action against an employee?” is not black and white. Accordingly, employers who wish to provide information about disciplinary action taken against ex-employees should still consult with experienced employment counsel before doing so. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

High legal fees are an unavoidable fact of life for many commercial litigants.  A client’s ability to commence, and successfully litigate, even a highly meritorious case often hinges on whether he or she can afford the inherent cost. This is particularly true in a “business divorce” case involving a limited liability company, where a client who is a minority member of an LLC has suffered financial harm at the hands of one or more members who control the LLC. For this reason, minority members involved in a dispute against majority members almost always ask whether they can recover the legal fees they are forced to incur to protect themselves from their adversaries’ wrongful conduct.  The answer is almost always no, unless the operating agreement provides that remedy.  To make things worse for minority members, the Limited Liability Company Law provides that under certain circumstances, the controlling member or members may be entitled to indemnification, and even advancement, of legal fees by the LLC, while the minority member is forced to fund his or her lawsuit out of his or her own pocket. LLCL §420 states: “Subject to the standards and restrictions, if any, set forth it its operating agreement, a limited liability company may, and shall have the power to, indemnify and hold harmless, and advance expenses to, any member, manager or other person, or any other testator or intestate of such member, manager or other person, from and against any and all claims and demands whatsoever; provided, however, that no indemnification may be made to or on behalf of any member, manager or other person if a judgment or other final adjudication adverse to such member, manager or other person establishes (a) that his or her acts were committed in bad faith or were the result of active or deliberate dishonesty and were material to the cause of action so adjudicated or (b) that he or she personally gained in fact a financial profit or other advantage to which he or she was not legally entitled.” There is a lot to unpack in that long sentence, but the key points are: The party entitled to indemnification (or advancement) is the party who is the target of a claim or demand The LLC’s operating agreement may modify, restrict or even eliminate the right to indemnification (or advancement) of legal fees A party seeking indemnification will be denied that remedy where it is finally determined that he or she committed the wrongful acts which gave rise to the claim or demand. The case law reveals that the terms of LLC indemnification/advancement clauses vary.  Some operating agreements require the prospective recipient of advanced legal fees to give an affirmation of his or her good faith belief that he or she did not engage in the misconduct alleged, and to give an undertaking for the repayment of any legal fees advanced if it is determined that the recipient did in fact commit wrongful acts.  Other operating agreements limit the availability of indemnification or advancement to potential liability based on actions performed by the prospective recipient within the scope of the authority conferred by the operating agreement.  The case law also makes a distinction between indemnification for legal fees at the conclusion of the litigation and advancement of legal fees during the course of the litigation. The Fourth Department ruled conclusively on that distinction in its August 22, 2019 decision in Mangovski v. DiMarco.  In that case, plaintiff brought direct and derivative claims against Stephen DiMarco, individually and as the trustee of a family trust, and a number of related companies.  Among other claims, plaintiff alleged that DiMarco breached a contract with plaintiff and otherwise breached his fiduciary duties to plaintiff.  Plaintiff also asserted that the defendant companies should be barred from paying DiMarco’s legal fees.  Supreme Court granted plaintiff’s motion for a preliminary injunction barring the advancement of those fees.  Defendants appealed, but the Fourth Department refused to vacate the order enjoining the defendant companies from advancing DiMarco’s defense costs. In rejecting defendants’ arguments, the Fourth Department first noted that although LLCL §420 permits the advancement of legal fees to a member, “the statutory language is permissive and does not per se create a legal duty to indemnify.” Second, the Court stated that it had to review the language of the subject operating agreements to determine whether DiMarco was entitled to the advancement of his legal fees, because the statute clearly subjects the availability of indemnification (or advancement) to the “standards and restrictions” of the operating agreement in issue. Third, after reviewing the subject operating agreements, the Fourth Department found that they did not provide for advancement of legal fees, but only for indemnification provided that DiMarco was not ultimately found to be in breach of any of his duties. Lastly, the Court held that even if the operating agreements had permitted the advancement of legal fees before a determination on the merits rather than indemnification, it would nevertheless affirm that part of the order enjoining the defendant companies from paying DiMarco’s defense costs, because plaintiff submitted evidence raising significant concerns that DiMarco was engaging in acts that threatened to render any final judgment ineffectual. Mangovski is an important decision for minority members seeking some semblance of a level playing field in LLC litigation.  The potential availability of indemnification may give comfort to a majority member sued for wrongful conduct.  But the ability to have his or her legal fees advanced in real time by the LLC, while knowing the minority member has to use his or her own money to keep the lawsuit going, emboldens the majority member to litigate with impunity – multiple motions, unreasonable objections to discovery requests, burdensome discovery demands – and try to bury the minority member in legal fees.  The distinction between indemnification and advancement must be enforced in LLC disputes to avoid the surrender of meritorious claims in the face of improper financial advantage. Download the Reprint from The Daily Record As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

If you have manual workers on your payroll, ensure they are all paid with the frequency required under the law.  Section 191 of New York Labor Law requires that manual workers be paid weekly, not biweekly.  This is perhaps a lesser known provision of the law.  There was previously a question of what exactly the ramifications would be for an employer who paid its manual workers all wages due, but on a biweekly basis, in violation of the law.  There could be fines imposed by the Department of Labor, but it was unclear what exactly an employee could recover when the employee did not actually lose wages. Recently, an appellate court in New York made clear that even when a manual worker has been paid every cent due as wages, that worker could be entitled to liquidated damages equal to the amount of his or her wages for the relevant time period.  This means that an employee could sue his or her employer and collect up to six years of pay if he or she was incorrectly paid on a biweekly basis, even if that employee was fully paid for that entire time period. For employers with many manual workers, this can result in a huge liability if the workers file suit.  It’s unclear currently if employees who bring such a lawsuit would be entitled to attorneys’ fees or not, but if a court finds fees can be granted, there is a huge incentive for firms to seek out potential plaintiffs for collective action litigation. If you are unsure if some or all of your workers fall into the definition of “manual worker,” check with counsel to ensure you are in compliance.  As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Sarah F. Bothma has joined Underberg & Kessler LLP as a Corporate Associate. She was formerly a Tax/Corporate Associate at Waller Lansden Dortch & Davis in Nashville. Sarah earned her LLM in Taxation from New York University School of Law and received her JD from Cumberland School of Law, Samford University, where she was the Senior Associate Editor of the American Journal of Trial Advocacy. She graduated cum laude with a BA from the University of North Carolina Asheville. While at Waller Lansden, Sarah focused her practice on complex tax matters and represented  clients in mergers, corporate reorganizations, asset and stock sale and purchase transactions, private placements of securities, joint ventures, and private equity transactions. She also advised clients on limited liability companies, partnerships, REITs, “S” corporations, private equity and real estate funds. Her experience includes numerous acquisitions of hospitals and healthcare facilities as well as manufacturing entities. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.

Margaret E. Somerset, a partner at Underberg & Kessler LLP, won the 2019 ATHENA Leadership Award for her efforts in making a difference in the Canandaigua, NY area. Those nominated for the ATHENA Leadership Award were selected because they “have achieved the highest level of professional excellence, contribute time and energy to improve the quality of life for others in the community, and actively assist others, particularly women, in realizing their full leadership potential,” as directed by the ATHENA Leadership Awards program. The ATHENA Leadership Award was established in the early 1980’s in Lansing, Michigan and began in Canandaigua in 1984. Each year, eight women are nominated who demonstrate the aforementioned criteria through their achievements. When Margaret ponders the most meaningful leadership roles she has served in during her community service efforts she recalls: •Being a leader during the early days of Lawyers for Learning, which supplies thousands of elementary school students with mentors and school supplies. •Leading Crestwood Children’s Foundation’s search for a new director for the children’s center and a merger with Hillside to ensure critical services continued to be available for behaviorally and emotionally challenged children. •Leading numerous dog rescue relationships, one of which resulted in 34 Bassett Hounds being rescued from puppy mills. •Serving on the Executive Committee of the Board of Directors of UR/Thompson and chairing their Ethics Committee. Upon receiving the award, Margaret stated: “Our firm is a very special place to work. Without the teamwork of us all, none of us could extend ourselves further into the community. This award is actually a testament to the support that all of us provide to each other.” To learn more about the ATHENA Leadership Award, click here. As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.