Tag Archives: Drewes

There are a Million Reasons (Almost) for Careful Attention To Employee Time and Wages

17 Mar

As a restaurant in Copiague, N.Y. learned the hard way, failure to track and pay employee hours accurately can lead to a big matzah ball of legal liability.  The Wage and Hour Division of the United States Labor Department has announced that the restaurant was ordered to pay $390,000 in back wages to approximately 40 employees who had not properly been paid overtime pay and had not received the equivalent of the required minimum wage, despite working 70-80 hours per week in some cases.  Based upon “liquidated damages” provisions under applicable law, the restaurant also was ordered to pay an additional amount equal to the  back pay owed to the employees.  As a result, the restaurant was required to pay the employees a total of $780,000.  The restaurant also apparently was adjudged not to have properly tracked wages and tips, and to have paid employees with un-tracked cash payments, leading to an additional civil fine of $20,000.  All told, the restaurant is picking up an $800,000 tab for its lax record keeping and for underpaying its overworked employees.

The action against the employer was based upon the Fair Labor Standards Act, a federal law which requires employers to pay qualifying employees at least the federal minimum wage, plus time and a half for time spent at work beyond 40 hours in a given week.  Although there is no indication the violations were inadvertent in this instance, an employer is not excused from paying an employee overtime even if the employer has not directed the employee to work overtime, but the employer generally has to be aware the employee is doing so before it is responsible to pay.  There also are provisions aimed at protecting employees who report a violation of the FLSA.

There also may be state laws that apply to a given situation where there are unpaid compensation or a failure to account for employee time.  For example, our home state of Minnesota has passed legislation that  provides strong remedies to employees, and even commission-based agents, who have not been paid as required.  There are strict timing requirements that apply to these payments as well.

Employers or employees with questions about whether a business is in compliance with the law should seek the assistance of counsel in determining whether the FLSA applies and whether changes are necessary.  Also, an attorney can pursue or defend cases for recovery of unpaid wages under the FLSA as well as applicable state laws.  If you have a question, contact us at Thomsen Nybeck.

Matt Drewes contributed this post.  Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s nine-member Community Association Representation Group and the firm’s Creditors’ Remedies Group. and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law and insurance.  He has been included in Minneapolis/St. Paul Magazine’s list of Rising Stars for several years, and has been quoted on issues involving construction litigation, community associations and real property issues in the Minneapolis Star Tribune, Minnesota Lawyer, Yahoo!Finance.com, Bankrate.com, and elsewhere.  He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

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Is Collecting Money About to Get Harder?

25 Feb

In this challenging economy, one of the most important services we offer is helping clients collect money.  Garnishment is a vital tool created by statute, which we use to help these clients by seizing a debtor’s money from another party who may owe or be holding that money for the debtor.  Often this includes a bank where the debtor holds an account.

The garnishment process does not involve the immediate turnover of the seized funds to the creditor; banks typically respond to a garnishment by stating the amount that is in the debtor’s account.  The bank then holds that money for up to six months until we “levy” on the money, unless the debtor can point to a reason under law that the funds should not be released to the creditor.

A case recently filed in the United States District Court in Minnesota challenges the constitutionality of the garnishment process.  The plaintiffs in Billiar v. Atlantic Credit & Financial, Inc. claim the rights provided to creditors under the statute violate the 14th Amendment to the U.S. Constitution, the so-called “Due Process Clause”.  The Due Process Clause provides, essentially, that no person may be deprived of his or her property without first receiving “due process”, or in other words notice and an opportunity to be heard.

The claim asserted in Billiar is that the creditor, who was owed money by Mark Fiers, garnished an account that Mr. Fiers held jointly with his children and his partner Kristie Billiar.  Only Mr. Fiers owed money to the creditor, so the creditor had first obtained a judgment against Mr. Fiers, but it did not have a judgment against the other account holders.  So while Mr. Fiers received notice and the opportunity to be heard, Ms. Billiar and the children did not.

A recent Minnesota Supreme Court decision previously established that creditors may seize funds in a joint account until and unless the non-debtor is able to establish that the funds in the account do not belong to the debtor.  Ms. Billiar and the other plaintiffs claim that seizing the money of someone other than the debtor is not fair unless you first give them notice and a chance to object.  The plaintiffs and others also point out that even seizing money for a day may cause a check to bounce, causing further damage to the non-debtor.

On the other hand: 1) neither the creditor nor the bank know how much of each account holder’s money is in the account, and a creditor who knows of the account may not know it’s a joint account, so requiring the creditor to provide notice to a non-debtor is not practical; 2) it is reasonable to assume that anyone who holds an account jointly with another person would (or should) be aware of a judgment against the debtor; and 3) if funds held jointly with another person were automatically protected from creditors, then debtors would have an easy way to stop collection activities simply by opening joint accounts.

As attorneys who perform a lot of this work, we will be watching the outcome of this case.  Regardless what happens, however, we will continue to use our creative and results-driven approach to helping clients get paid.

Matt Drewes contributed this post.  Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s nine-member Community Association Representation Group and the firm’s Creditors’ Remedies Group. and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law and insurance.  He has been included in Minneapolis/St. Paul Magazine’s list of Rising Stars for several years, and has been quoted on issues involving construction litigation, community associations and real property issues in the Minneapolis Star Tribune, Minnesota Lawyer, Yahoo!Finance.com, Bankrate.com, and elsewhere.  He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

Small Businesses May Catch a Break: Small Business Administration is Funding Commercial Loan Refinancing for Loans Maturing By End of 2012

25 Feb

Struggling small businesses may catch a break based upon a new, temporary program from the U.S. Small Business Administration.  Beginning February 28, 2011, the SBA will begin accepting refinancing applications under this new offering within its 504 loan program.  The program applies to commercial loans that will mature or otherwise have balloon payments due on or before December 31, 2012.

Historically, 504 loans have been used to foster long-term financing opportunities for small businesses by providing them with fixed rates and the flexibility of a low initial equity contribution (as low as 10%).  The businesses could then finance up to 90% of the cost of the proposed project or improvement by receiving an SBA guaranteed loan for up to 40% of the cost of the project.  This portion of the financing is funded by an SBA Certified Development Company and secured by a second mortgage.  The availability of subordinated financing reduces the risk and enhances the prospect of bringing in a private lender, which then funds up to 50% of the project cost and receives a first mortgage to secure its loan.

The new program will tweak the standard 504 loan protocol to suit the goal of refinancing those loans reaching maturity owed by stressed, but viable, businesses.  The borrower may refinance the lesser amount of 90% of the current appraised value of the property, or 100% of the existing loan, as well as certain costs associated with the refinancing.  You can read more about the loan program at the Costar Group’s website on its “Headlines” page, here.

There are signs of revitalization in the world of commercial real estate, and this new SBA program has the potential to further that growth, one small business at a time.  If you’re a business owner looking to expand, modernize, or simply to seek relief from the squeeze of an existing loan coming due, or if you’re a commercial lender, we at Thomsen Nybeck provide prompt, efficient and cost-effective legal services to both commercial lenders and borrowers.

Matt Drewes contributed this post.  Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s nine-member Community Association Representation Group and the firm’s Creditors’ Remedies Group., and practices in the areas of business and real estate litigation and transactions, construction litigation, community association law, debtor/creditor law, insurance and employment.  He has been included in Minneapolis/St. Paul Magazine’s list of Rising Stars for several years, and has been quoted on issues involving construction litigation, community associations and real property issues in the Minneapolis Star Tribune, Minnesota Lawyer, Yahoo!finance.com, Bankrate.com, and elsewhere.  He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

Minnesota Construction Warranty Claims: New Procedures for 2011

18 Jan

You may be familiar with (or at least aware of) the warranties provided to homeowners under Chapter 327A of Minnesota Statues.  These warranties include a one-year warranty on all workmanship and materials, a two-year warranty on plumbing, electrical or other mechanical systems, and a ten-year warranty against major construction defects.  These warranties apply to new or newly remodeled residential property (which can include single-family homes or community associations, such as condominiums or townhouses), and are binding against the builder (of a new home) or contractor (in the case of a remodeling project).  Throughout the rest of this article, I will refer to both as a “contractor”, though homeowners should appreciate there can be a difference.

For years, Chapter 327A has contained certain procedures that owners must follow to preserve a claim for a breach of one or more of these warranties.  Effective January 1, 2011, these procedures now have been revised, and new procedures have been added.  You can read the complete text of the new statute here.  The legislature’s goal in making these changes is to try to reduce the number of lawsuits that are necessary to resolve these warranty disputes, but as with any new process there will always be traps for the unwary and navigating the new procedures is bound to catch more than a few homeowners off guard.

The process still provides that written notice of an alleged defect must be provided to the contractor within six months of the discovery of the defect, with the new exception being where the owner can demonstrate the contractor had actual notice of the claimed defect. Of course, it’s best to provide timely written notice if you wish to rely on this statutory warranty.  Many owners falter by failing to provide this notice within six months of discovering the defect.

After this notice has been provided, the contractor has always been required to inspect the alleged defect within 30 days and propose a repair.  The new amendment now requires the owner to allow the contractor to conduct “invasive” testing to determine the extent of any damage or the proper type of repair, however.  Invasive testing may involve making test cuts in stucco or interior drywall and/or using a probe to test the moisture content of the wood framing members of the home, though the statute does not specify.  It is of course fair to permit the contractor a reasonable opportunity to understand fully the defect (if any) involved, and the contractor is required to place the property back into “pre-inspection condition” following any invasive procedures, but it is unclear how this restoration process will be measured or enforced in practice.

In the event the contractor inspects the property and the owner and contractor cannot agree on the proposed repair (and owners should carefully evaluate proposed repairs, preferably with the assistance of a trusted contractor, engineer or attorney), the homeowner must (yes, must) follow through with the new “home warranty dispute resolution process”.  The new dispute resolution process requires the selection of a “qualified neutral” from a list maintained by the Minnesota Department of Labor and Industry, which will charge aspiring neutrals a $200 fee to be listed.  There are rather short timeframes applicable to the steps for selecting a neutral, so homeowners should consult with an experienced member of the construction industry and/or their own construction attorney before submitting their claim to the commissioner of the Minnesota Department of Labor and Industry.  Otherwise they will find themselves with little time to make a decision about the neutrals from which they must choose to evaluate their case.

After a neutral has been selected, the parties must meet together with the neutral and each will submit its own reasons why its proposed repair is proper.  There is a fee of $25 per party for participation in the process, in addition to the hourly fees of the neutral third-party the parties select.  It also is possible the parties will use attorneys to represent them through this process, and contractors with insurance coverage almost certainly will have attorneys present to represent them, though homeowners presumably will not be required to do so.  According to the amendment, at the end of this process the neutral third party does not issue a binding decision (it simply is an evaluation). Moreover, this evaluation may not be used as evidence in any later litigation if the “unreasonable” party does not care to acknowledge that it is being unreasonable. The process does, however, provide the parties with perhaps some further understanding of the potential damages at stake and chances of a favorable (or unfavorable) result.

Barring certain exceptions, the parties must complete this process before litigation can be commenced.  However, there are four situations which owners may commence litigation earlier if the contractor is not engaging in the process in good faith:

1) The homeowner may sue the contractor immediately if:

a) the contractor fails to conduct an inspection within 30 days after the owner has provided written notice of the defect;

b) the contractor performs the inspection but fails to provide a written proposal to make a repair of the alleged defective condition within 15 days after the inspection is complete;

c) the contractor provides a proposed repair, to which the owner agrees, but the contractor does not perform the repair.

2) The homeowner may also sue the contractor following the expiration of 60 days from the owner’s receipt of the contractor’s repair proposal, whether or not the dispute resolution process is complete.

In the event the evaluation process is not successful in bringing the owner and contractor to a resolution, the new amendment also alters certain timing considerations applicable to a construction defect lawsuit. This is because there are numerous claims (or theories of recovery) applicable to construction defect cases. These can include not just a claim that the contractor breached one or more of the statutory warranties under Chapter 327A, but also that the contractor breached an applicable contract, or that the contractor was negligent. There are also other warranties that may apply, including warranties applicable to common interest communities (condominiums and townhouses) as well as warranties covering the sale of goods (such as windows, doors, shingles, etc.). Each of these claims has not only its own standards, but each also has an applicable limitations period (the period within which you must sue or your claim is barred) which may be different from the next. The amendments to 327A now provide that, for as long as an owner is following this statutory procedure, or for 180 days, whichever is longer, all of those claims will be “tolled” (meaning their expiration will be delayed). This is a useful provision for ensuring a homeowner does not lose the right to commence litigation as a result of participating in this mandatory dispute resolution process.

The new provisions of Chapter 327A certainly have created more opportunities for construction defect cases to reach resolution outside of court, in theory.  However, there is little likelihood that a contractor who was being unreasonable under the prior procedures failed to realize it was being unreasonable, and there is little consequence to a contractor that fails to reach a reasonable resolution even under this new scheme.  Therefore, until we have seen this process utilized a few times, we do not know whether it will provide aggrieved homeowners with a legitimate alternative to litigation, or just another hurdle to clear to obtain a recovery under Chapter 327A.  In the meantime, if you have any questions about whether this process applies to you and how to comply with its provisions, contact Matt Drewes or one of the other construction litigation attorneys at Thomsen Nybeck.

Matt Drewes contributed this post.  Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s 10-member Community Association Representation Group and co-leads the firm’s construction litigation group.  Matt practices in the areas of business and real estate litigation, construction litigation, community association law, debtor/creditor law, insurance and employment, has been included in Minneapolis/St. Paul Magazine’s list of Rising Stars for several years, and has been quoted on issues involving construction litigation, community associations and real property issues in the Minneapolis Star Tribune, Minnesota Lawyer, Yahoo!finance.com and Bankrate.com, and elsewhere.  He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

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