IRS Ruling Makes Cafeteria Plans Attractive

An employer gave new employees the option to choose a package of fringe benefits and a reduced wage or a higher cash wage. The IRS ruled that those employees who chose the fringe benefits had additional taxable wages equal to the salary reduction. Since the employer did not withhold, the employer was liable.

Why This Is Important ... This ruling clarifies that the only way to effectively avoid taxation for fringe benefits is to use a Cafeteria Plan. Such a plan can offer a variety of fringe benefits and make a salary reduction nontaxable.

Interest & Attorney Fees in Discrimination Cases

A former foreman who said he was fired from his job violating state and federal employment discrimination laws was entitled to prejudgment interest at the Massachusetts rate of 12% rather than the federal rate of 9%, according to a court ruling. Where parallel claims are brought under federal and state law, and the damages recovered are duplicate, the plaintiff can select the body of law under which the damages will be paid. The court also awarded the plaintiff attorney fees though the plaintiff and his lawyer signed a fee agreement which paid the lawyer one-third of the jury verdict and court awarded attorneys' fees.

Why This Is Important . . . Some plaintiffs can chose the body of law with the highest rate of interest and can recover attorneys' fees no matter whether there is a limit on how much the plaintiff must pay his or her attorney.

Asbestos Revival Statute Applies to Installers

The Massachusetts Appeals Court has decided that the Massachusetts asbestos revival statute applies to asbestos installers. The statute allows the State to bring asbestos actions within six years after the state or any political subdivision knew of the presence of asbestos within its buildings. The Appeals Court found that the statute applies to installers and manufacturers both.

Why This Is Important . . . The ruling opens asbestos installers to greater liability.

IRS Rules On Effect Of FMLA Leave On COBRA

The COBRA maximum coverage period is measured from a "qualifying event." The IRS says a COBRA qualifying event occurs on the last day of an employee's FMLA leave if the employee does not return to work and would then lose coverage under the employer's health plan. This is not changed even if the employee fails to pay premiums during the leave. The IRS also says the right to COBRA continuation coverage cannot be conditioned upon an employee's reimbursement of the employer for any premiums the employer paid to maintain the employee's coverage under the group health plan during FMLA leave.

Why This Is Important . . . This extends COBRA coverage beyond the end of any FMLA leave and makes the fact of non-payment during FMLA leave a non-issue.

Employee Complaints & Software Exports

How an employer investigates employee complaints can assist in either killing or enhancing liability. Exporting software is subject to a complex set of federal regulations. Active Nicolai Law Group clients received memoranda on both subjects this month.