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Pro Tip: Don’t lie on federal forms

Author By Finney Law FirmPosted on

The Dayton shooting earlier this year was horrific and sad for the victims and their families. One friend of the shooter has found himself in legal jeopardy not for any involvement with the shooting, but for his willingness to assist the law enforcement investigation efforts.

In order to purchase a firearm from a federally licensed firearms dealer, one must complete ATF Form 4473, which asks, among other things, if you are addicted to, or a user of illegal drugs. Since at least October 2016, the form includes a warning that marijuana is still illegal under federal law regardless of whether states have legalized or decriminalized marijuana.

In helping law enforcement, Ethan Kollie allowed federal agents into his home and admitted to habitual use of marijuana and psychedelic mushrooms.  Review of Kollie’s Form 4473s revealed that Kollie had marked “No” in response to the illegal drug question. Thus, upon finding firearms and illegal drugs in Kollie’s home, the federal government had an open and shut case for (1) lying on ATF Form 4473 (18 USC § 924; and (2) being a user of unlawful drugs in possession of a firearm (18 USC § 922(g) & (n).

Kollie admitted that he lied about his drug use on the form because he knew he would not be able to purchase firearms had he answered truthfully.

Lying on Form 4473 is a felony punishable by up to ten year’s imprisonment. For being a user of unlawful drugs in possession of a firearm, the punishment is up to five years in prison.

Keep in mind that Mr. Kollie’s crimes have nothing to do with the shooting. He simply agreed to talk to law enforcement and allowed them into his home, and those discussions and the permitted search of his home resulted in these charges.

Mr. Kollie has plead guilty and is expected to be sentenced in early 2020.

Two major lessons from Mr. Kollie’s conviction: (1) don’t lie on federal forms; and (2) consult an attorney before you allow law enforcement access to your home. Mr. Kollie is learning these lessons the hard way.

Ohio’s Statute of Frauds – Get it in Writing!

Author By Finney Law FirmPosted on

As discussed in a previous post, courts will only enforce contracts for the sale of real estate if the contract is in writing (and signed by the person against whom you seek enforcement). Click here to read that post.

The legal principle that requires certain contracts to be in writing is the Statute of Frauds. In Ohio, the Statute of Frauds is codified in Chapter 1335 of the Ohio Revised Code; and the Statute of Frauds covers more than just real estate contracts (both sales and leases). For example, R.C. 1335.02 requires loan agreements with financial institutions be in a signed writing to be enforced. However, “the use of a credit card results in the person using the card being bound by the card member agreement.” Citibank, N.A. v. Ebbing, 2013 -Ohio- 4761, ¶ 13, 2013 WL 5783722, at *3 (Ohio App. 12 Dist.,2013)

R.C. 1335.05 extends the Statute of Frauds to a promise to pay the debts of another person; an executor’s promise to pay the debts of the estate from her own funds; an agreement made in consideration of marriage; and for contracts that are not to be performed within one year.

R.C. 1335.11 further extends the requirements of the Statute of Frauds to sales commissions.

These same subjects are covered by Kentucky’s the Statute of Frauds at K.R.S. 371.010.

Despite the formal language of the statute, we see these in everyday life: a parent cosigning on a child’s student loans for instance. An agreement made in consideration of marriage includes prenuptial agreements (but not the agreement to marry itself).

When faced with oral agreements that are not to be performed within one year, courts will often engage in detailed analysis to determine if it is possible that the contract could have been performed within one year. For instance, in Jones v. Pouch, 41 Ohio St. 146, 1884 WL 84 (Ohio 1884), the Ohio Supreme Court ruled that an oral contract to construct a section of road in 1 year and 20 days was enforceable, because it was possible to have completed the work within one year, the additional twenty days were merely a precaution against contingencies. This case is still good law and was cited in the 2015 edition of Williston on Contracts despite being 131 years old.

Additionally with respect to agreements that are not to be performed within one year, Ohio’s courts have determined that the statute of frauds will not bar recovery where one party has fully performed their obligations under the contract but has not been fully paid. In another 19th century case, Towsley v. Moore, 30 Ohio St. 184, 1876 WL 176 (Ohio 1876) the mother of Olive Towsley, an 11 year old girl arranged for her to work in the home of Mr. Moore until she turned 18, in exchange for room and board, and, when she turned 18, Moore was to pay Olive the value of her services. The Court rejected Moore’s argument that the statute of frauds prevented Olive from recovering the value of her services. Ultimately, Moore was ordered to pay Olive $300.00 for her nearly 7 years of service.

Even where a contract fails to satisfy the requirements of the Statute of Frauds and a breach of contract claim cannot be brought, a claim for unjust enrichment or other equitable claims may allow you to obtain a just result.

Whether you are the borrower or the lender, employer or employee, you can avoid these questions by getting your contract in writing and signed by all parties.

Has a sanitary sewer backup damaged your property?

Author By Julie M. GuginoPosted on

If you have a business or residential property in Hamilton County that experiences flooding that includes sewer effluent, you may have a claim for repairs to damage, and retrofitting your property to prevent future flooding.

Master settlement with US EPA

In 2002, the US EPA, the State of Ohio, and others brought suit against Hamilton County and City of Cincinnati alleging that overflows of MSD’s sanitary sewer system violated the Clean Water Act and related Ohio laws and regulations. They challenged the capacity and pollution problems with MSD’s sewer system, including sewage overflows from MSD’s sanitary sewers, overflows from combined storm water and sanitary sewer lines, deficiencies at wastewater treatment plants, and backups of sewage into homeowners’ basements.

On December 3, 2003, a final settlement was reached with the Board of Commissioners of Hamilton County and City of Cincinnati. The case was pending in the U.S. District Court in the Southern District of Ohio. Under the settlement, Metropolitan Sewer District of Greater Cincinnati (MSD) agreed to bring its aging sewer system into compliance with the Clean Water Act.

Consent Decree creates Sewer Backup Program 

In June 2004, the Court approved two consent decrees aimed at eliminating all sanitary sewer overflows. The Consent Decree established a comprehensive framework for the County and City to develop and implement a long-term plan for infrastructure improvements to address the capacity and pollution problems with MSD’s sewer system. The Consent Decree also required the County and City to implement programs to prevent basement backups, clean up backups when they occur, and reimburse residents for property damages for sewer backup events. This probram is referred to as the Sewer Back Up Program (“SBU”), formerly known as the Water in Basement Program, whereby aggrieved homeowners who have experienced backups to their Property emanating from MSD sewers can recover their damages.

Claims process

There are multiple steps in the MSD claims process.

  • First, a homeowner who has experienced a backup to their Property must report the same within 24 hours, either at (513) 352-4900 (24 hours/7 days a week) or online here.
  • Second, that homeowner should fully document with photos and videos the backup, as well as all entry points, including sewer drains at the Property.
  • Next, within 2 years of the date of the backup, a homeowner must complete and submit the Sewer Backup Claim Form available here.

MSD will conduct a technical evaluation and upon determination that MSD is responsible, assign the claim to a claims adjuster. Once the claims adjuster has completed its review, the proposed settlement is sent to MSD for legal review and once approved by MSD legal, a letter containing the settlement offer and release is sent to the Property owner, the Claimant. If the Claimant is in agreement with the settlement offer, he/she signs the release and returns it to MSD. If the claimant is not in agreement with the settlement offer, he or she may further discuss the amount with MSD or pursue the Review Process set forth by the Court, as set forth herein.

Review of decision by Federal Magistrate Judge

Claimants who are dissatisfied with MSD’s disposition of a claim under the SBU program may request review of the decision by the Magistrate Judge in Federal Court, whose decision is binding and not subject to any further judicial review. In accordance with the Consent Decree, Federal District Court case #C-1-02-107, the Claimant may file a Request for Review with the Federal Court in Cincinnati, Ohio. The Claimant should file that Request within 90 days with the Clerk’s Office of the Federal Court located in the Potter Stewart U.S. Courthouse, Room 103, 100 East 5th Street, Cincinnati, Ohio 45202. The Claimant may also call the court-appointed Ombudsman, the Legal Aid Society, at (513) 362-2801 for further information.

In determining the cause of an SBU, MSD must exercise its good faith reasonable engineering judgment and consider the following non-exclusive factors: amount of precipitation, property SBU history, condition of the sewer system in the neighborhood, results of a visual inspection of the neighborhood to look for signs of overland flooding, neighborhood SBU history, capacity of nearby public sewer lines, and topography. United States v. Bd. of Hamilton County Comm’rs, 2014 U.S. Dist. LEXIS 157434, *17-18 (S.D. Ohio Nov. 6, 2014).

Damages that can be recovered

Damages arising from basement backups for which MSD is responsible are limited to documented real and personal property. Under the Consent Decree, “[d]amages will be paid for losses to real and personal property that can be documented” and “[c]laimants will be asked to submit copies of any documents that they may have that substantiate the existence and/or extent of their damages.” (Doc. 131, Exh. 8 at 2-3). United States v. Bd. of Hamilton County Comm’rs,2014 U.S. Dist. LEXIS 37601, *27 (S.D. Ohio Mar. 20, 2014).

The Claims Process will only reimburse for damages arising from basement backups caused by inadequate capacity in MSD’s Sewer System or that are the result of MSD’s negligent maintenance, destruction, operation or upkeep of the Sewer System. United States v. Bd. of Hamilton County Comm’rs, 2014 U.S. Dist. LEXIS 37601, *22-23 (S.D. Ohio Mar. 20, 2014). Claimants seeking a review of the denial of an SBU claim bear the burden of proof of showing that the backup of water into their property was due to inadequate capacity in MSD’s sewer system (a sewer discharge) and not overland flooding.

Inadequate capacity versus overland flooding

However, Courts have found that there is nothing in the language of the Consent Decree that limits recovery where the evidence shows damages were concurrently caused by a combination of overland flooding emanating from MSD’s Sewer System and overland flooding not emanating from MSD’s Sewer System. The language of the Consent Decree does not require that SBU be the sole or greater cause of the damages sustained, or that damages should be apportioned where damages are caused by both SBU and overland flooding not emanating from MSD’s Sewer System. Under the terms of the Consent Decree, homeowners “who incur damages as a result of the backup of wastewater into buildings due to inadequate capacity in MSD’s Sewer System (both the combined and the sanitary portions) can recover those damages. . . .” United States v. Bd. of Hamilton Cnty. Comm’rs, 2016 U.S. Dist. LEXIS 46858, *10-11 (S.D. Ohio Mar. 29, 2016).

The Court has found that language of Consent Decree excluding overland flooding “not emanating from MSD’s Sewer System” necessarily contemplates circumstances where overland flooding in fact “emanates” from MSD’s Sewer System. Thus, where the public sewer discharges from the cover of the manhole and flows over ground and into a building, the terms of the Consent Decree cover any subsequent claim for damages. Accordingly, the Consent Decreedoes not bar claims for overland flooding which emanates from MSD’s Sewer System. United States v. Bd. of Hamilton County Comm’rs, 2014 U.S. Dist. LEXIS 37601, *23-24 (S.D. Ohio Mar. 20, 2014) The fact that overland flooding may occur and ultimately contribute to the lack of sewer capacity — resulting in a sewer surcharge does not exclude sewer backup as one cause of the damages sustained. The language of the Consent Decree does not require that SBU be the sole or greater cause of the damages sustained, or that damages should be apportioned where they are caused by both SBU and overland flooding not emanating from MSD’s sewer system. United States v. Bd. of Hamilton Cty. Comm’rs, 2017 U.S. Dist. LEXIS 79177, *19-20 (S.D. Ohio May 23, 2017).

Conclusion

If you have experienced a Sewer Back Up and would like assistance with the claims process or review of your claim in federal court, please contact Julie Gugino at 513-943-5669.

St. Clair Township Sues for Property Tax Revenue Payments

Author By Finney Law FirmPosted on

St. Clair Township in Butler County, Ohio has filed suit against the City of Hamilton, the Butler County Commissioners, Butler County Treasurer, and Butler County Auditor to recover lost tax revenue owed to it for properties that were annexed and excluded from the Township into the City of Hamilton.

Ohio Revised Code Section 709.19 provides that when property is annexed and excluded from a township, that township is entitled to be made whole via payments of a portion of the property taxes it would have collected over the next twelve years.

In 2016, the City of Hamilton and County Commissioners acted to exclude from St. Clair Township thousands of parcels that had previously been annexed from the township. This action triggered the obligation to make St. Clair Township whole. The City of Hamilton has thus far refused to comply with its obligations under Ohio law.

The complaint details the missteps along the way in excluding the property as well as the failure to make St. Clair Township whole.

The case has been assigned to Judge Craig Stephens of the Butler County Court of Common Pleas.

St. Clair Township is represented by Chris Finney of Finney Law Firm and Curt Hartman of the Law Firm of Curt C. Hartman. Mr. Hartman is lead counsel in the case.

The Journal News has coverage of the lawsuit here.

Read the complaint below or here.

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Our twin class action wins in Bedford and Oakwood are featured in this blog entry

Author By Christopher P. FinneyPosted on

This blog post by attorney Stephen Richmond of the Cleveland and Columbus law firm of Kohrman Jackson Krantz features our important twin class action victories in federal court in challenging municipal post of sale and rental inspection ordinances as violations of the Fourth Amendment (unconstitutional warrantless searches) to the United States Constitution.

We co-counseled these cases with attorney Maurice Thompson of the 1851 Center for Constitutional Law, which uses litigation strategies to advance the cause of free enterprise throughout Ohio.

This blog entry actually misses the first in a series of point-of-sale warrantless search cases in Ohio, our challenge in 2014 an ordinance in the City of Portsmouth, Ohio.  That decision from 2015 by Federal District Court Judge Susan J. Dlott is reported here.

Importantly, the Finney Law Firm challenges and confronts zoning and land use enforcement actions by municipalities using all of the legal tools at the disposal of our clients, including the United States Constitution.

It explains the issues well.

 

 

 

Wealth and real estate investment

Author By Eli N. Krafte-JacobsPosted on

“The major fortunes in America have been made in land.”

John D. Rockefeller

Real estate investment is traditionally cited as one of the primary means that Americans have used to build wealth; a trend that continues to this day.  Whether it is the stability and comfort attained by the middle class or the luxuries enjoyed by the wealthy, with due diligence and hard work, real estate investment can help most Americans achieve their financial goals.  This post is part one of a series designed to provide useful and relevant information to both seasoned and green investors alike.

Types of Investments

The first step when diving into the market is determining what type of investment is most appropriate under the circumstances. While purchasing a personal residence is the most ubiquitous type of real estate investment, there are many opportunities to invest home ownership including: (i) holding rental properties, both commercial and residential; (ii) buying, renovating and selling properties; (iii) subdividing and developing raw land; or (iv) depositing money into real estate investment trusts.  There is no single avenue best suited for all investors, so it is important to gauge your options relative to your goals.

Relevant Persons/Parties

An ordinary purchase and sale requires only two parties, a buyer with cash and a seller with property.  Pragmatically, however, there can be a dozen or more parties to any transaction, which may include, but are not limited to: realtors/brokers, lenders, mortgage brokers, legal counsel, title companies and examiners, surveyors, environmental consultants, qualified intermediaries, accountants, tax professionals, etc.  Each party to a real estate deal is responsible for one or more roles in the process, but they must all work together seamlessly to complete the transaction in an efficient manner.

The Process

The biggest roadblock to jumping into the real estate market is knowing where to begin.  The good news is that there is no correct answer per se.  For example, the first-time homeowner might find it beneficial to meet with one or more lenders prior to searching for a home in order to determine: (i) what is in the buyer’s price range; (ii) what kind of programs might be available as a first-time homeowner; and (iii) to have the sense of certainty that comes with a mortgage pre-approval.  On the other hand, the experienced investor may want to start by meeting with his or her financial and legal advisors to better understand how a new purchase might affect the investor’s bottom line.  Thereafter, for both the seasoned and the green investor, the process is relatively similar: (i) find a property and get it under contract; (ii) perform any remaining due diligence, which includes getting a title examination; and (iii) close on the purchase and sale.

Liability Shield

For those seeking to invest in property other than a personal residence, it is important to decide whether the use of a limited liability company (LLC)—or another vehicle with a liability shield—is appropriate or desirable under the circumstances.  The main reason for purchasing through an LLC is to ensure that personal assets are protected from any claims associated with investment property.  This protection is invaluable in the event someone brings a lawsuit against the investor, but it is valueless if the investor fails to follow certain formalities when creating and maintaining the LLC.  An investor should always speak with an attorney when establishing an LLC or if there are any concerns regarding the ongoing formalities.

Realizing a Return; Tax Consequences

The term “investment” is defined as the action or process of investing money for profit or material result, which begs the question, how does an investor obtain a profit or a material result?  There are two primary ways to turn a profit with real estate investment: rental cash flow and appreciated value.  Rental cash flow is exactly what is sounds like, cash paid to the investor/landlord by tenants of a rental property.  Appreciated value refers to the increased value due to the passage of time.  Additional means of turning a profit include: (i) the increase in resale value after improving the investment property (e.g., updating appliances, replacing a roof, etc.) and (ii) ancillary income from things such as vending or laundry machines, or parking facilities.  Additionally, as with any type of investment, it is essential to understand how taxation will impact the ability to realize a profit.

Advanced Transactions

The savvy investor looks for ways to increase his or her profit margin on a regular basis.  Two of the more prevalent means of doing this include: (i) engaging in 1031 or like-kind exchanges and (ii) purchasing via drop and swap transactions.  The 1031 exchange allows an investor to defer paying capital gains taxes following the sale of an investment property so long as the proceeds therefrom are reinvested in “like-kind property” within a certain period of time.  The drop and swap transaction, which can be performed alongside a 1031 exchange, allows the investor to shield the purchase price from publication, which would inhibit an automatic increase to the tax basis if the purchase price exceeds the auditor’s value of the property.

This introduction to real estate investment is just that, an introduction.  Stay tuned for an in-depth analysis of each section and, as always, be sure to contact a lawyer or tax professional when seeking legal or tax advice.

Ohio Probate Law: Proper handling of insolvent estates

Author By Isaac T. HeintzPosted on

The laws governing the administration of a decedent’s estate in the State of Ohio provide for the collection of probate assets, payment of debts and expenses, and distribution to the beneficiaries according to the terms of the decedent’s Last Will and Testament, or if the decedent died without a Last Will and Testament, in accordance with Ohio law.

Declaration of insolvency

The Executor or Administrator (“Fiduciary”) of the decedent’s estate may ask Probate Court to declare the estate insolvent if the debts and administration expenses of the estate exceed the total value of the assets.  If there are not sufficient assets in a decedent’s estate to pay all of the debts and expenses, Ohio provides a way to pay creditors depending on the “class” of the creditor defined below and the amount due.

Presentation of claims

Under Ohio law, all claims must be presented to the Fiduciary within six (6) months of the date of death of the decedent. After the expiration of this claim period, if the estate is deemed to be insolvent, the Fiduciary would report the insolvency to Probate Court, and provide a complete list of all debts and expenses, with the amount due for each.  A hearing would be scheduled, with notice of the hearing served upon the surviving spouse of the decedent (if any), all persons having an interest in the estate as devisees, legatees, heirs, and distributees, and all creditors.

At the hearing, Probate Court would review the classification of the claims as provided by the Fiduciary, and if approved, would allow payment of the claims in accordance with Ohio Revised Code.

Classes of creditors and priorities

The class of a creditor is defined in Ohio Revised Code, which establishes ten (10) classes of claims (debts) and priorities, as follows:

  • Class 1 – Costs and Expenses of Administration
  • Class 2 – Funeral and Cemetery Expenses.  This class provides up to $4,000 for funeral expenses and up to $3,000 for burial and cemetery expenses.
  • Class 3 – Family Allowance of $40,000.
  • Class 4 – Debts Entitled to a Preference Under the Laws of the United States.
  • Class 5 – Expenses of the Last Sickness of the Decedent.
  • Class 6 – Additional Funeral Expenses.  If the total funeral expenses exceed the sum of $4,000 in class 2 above, then the funeral director can receive up to $2,000 more toward the decedent’s funeral bill in class 6.
  • Class 7 – Nursing Home Expenses.
  • Class 8 – Obligations to the State of Ohio.
  • Class 9 – Debts for Manual Labor.
  • Class 10 – Other Debts.

In the state of Ohio, the law is very clear that payments must be made in the specific order listed above.  No payments may be made to creditors of one class until all of those of the preceding class are fully paid.  If the assets are insufficient to pay all of the claims of one class, then the creditors of that class must be paid proportionately.

Once the approved claims and expenses are paid, the Fiduciary would report the receipts and disbursements to Probate Court for approval.  Upon approval by Probate Court, the estate would be closed.

Conclusion

In certain estates where there are assets with value, it may make sense to proceed with an insolvent estate, as the fee for the Fiduciary of the estate is a Class 1 claim.  Further, if there are sufficient assets to pay the Class 1 and Class 2 claims in full, the family allowance, as a Class 3 claim, would be paid to the extent of assets.  Therefore, the decedent’s family could possibly benefit from this approach.

___________________

For help with your estate planning or probate matter, contact Isaac Heintz (513-943-6654) or Tammy Wilson (513-943-6663)

 

Litigation 101: What to do if you’ve been sued

Author By Casey A. JonesPosted on

While it may seem obvious to some, many do not realize the very harsh consequences that can result from failing to respond to a lawsuit. If you’ve been sued and don’t really understand what the next steps are, you aren’t alone.

When a party files a civil (i.e., not criminal) lawsuit against another, the case is initiated upon the filing of a “Complaint.” The Complaint sets forth the parties, the factual allegations, the causes of action, and the remedy or relief sought.

Okay, so you’ve been served with the Complaint . . . Now what?

Once the defendant is served with the Complaint (thus, putting the defendant on notice of the lawsuit), he or she is required to respond within a certain number of days (28 days in Ohio; 20 days in Kentucky). The response to the Complaint could be an “Answer” (where the party will admit or deny each of the allegations and set forth any defenses it may have) or, alternatively, a defendant can respond with a variety of motions, such as a motion to dismiss.

If a defendant fails to respond to the Complaint within the time frame allotted, the plaintiff may move for “default judgment” against the defendant. This is, essentially, what it sounds like – the moving party wins by “default.” Under Ohio law, “default judgment is proper against an unresponsive defendant ‘as liability has been admitted or confessed by the omission of statements refuting the plaintiff’s claims.’”  Ohio Valley Radiology Assoc., Inc. v. Ohio Valley Hosp. Ass’n., 28 Ohio St. 3d 118, 121, 502 N.E.2d 599 (1986). In other words, if you do not refute the plaintiff’s allegations, you are deemed to have admitted them. The onus is on the defendant.

If you do not respond to the Complaint and, therefore, admit the allegations, the other side’s claims have, more or less, been proven in most instances. For example, if someone sues you for breach of contract and claims damages of $70,000.00, and you fail to respond to the Complaint (thus, admitting that you breached the contract and owe the sought damages), the Court can enter judgment against you for the full $70,000.00. The plaintiff can then begin to pursue collection efforts against you, including garnishing wages and/or bank accounts, foreclosing on property, etc.

Additionally, default judgments can be very difficult to have overturned. In order to get relief from the judgment, a defaulting defendant must demonstrate that he or she has a meritorious defense to the lawsuit, that one of the provisions of Civ.R. 60(B) applies, and that the motion for relief was filed within a reasonable time after the judgment was entered. GTE Automatic Electric, Inc. v. ARC Industries, Inc., 47 Ohio St. 2d 146, 150-51 (1976). This is not always an easy task.

In the case of Ben. Ohio, Inc. v. Poston, 5th Dist. Fairfield No. 03-CA-07, 2003-Ohio-4577, the court held that defendants were not entitled to relief from judgment where their daughter signed for service of the Complaint and did not inform them. In Fouts v. Weiss-Carson, 77 Ohio App. 3d 563 (11th Dist. 1991), the defendant was not entitled to relief from judgment where she claimed she was distraught from her divorce and seeking psychiatric treatment when her response was due, absent a showing that defendant’s condition rendered her incompetent). And in Universal Bank N.A. v. Thornton, 8th Dist. Cuyahoga No. 72553, 1997 Ohio App. LEXIS 5694, at *7 (Dec. 18, 1997), the court held “[a] party who willfully and deliberately chooses to ignore a complaint and has stated no other reason for failing to appear or answer a complaint has not stated adequate grounds for relief from default judgment.”

The Answer: Answer the Complaint (and Make a Plan), and We Can Help You

 Even if you believe the claims against you are entirely meritless, it is still important to respond to any claims filed against you so that you can refute the plaintiff’s claims and assert your defenses. You may even have a viable counterclaim against plaintiff (which often incentivizes an early settlement and/or dismissal). While no one wants to spend a ton of money defending a lawsuit (especially a meritless one), it is necessary to follow the proper steps and maybe even formulate an “exit strategy.” Otherwise, the result could be devastating. The litigation team at the Finney Law Firm understands that the legal process can be confusing (and, sometimes, even unforgiving) to those who, like most, don’t litigate often. We would be happy to speak with you about your rights and obligations as a party in litigation, as well as strategies to help minimize your exposure.

Ohio Employment Law: Is a salesperson entitled to receive sales commissions after his or her employment ends?

Author By Stephen E. ImmPosted on

Most salespeople are compensated at least in part on commission. Some earn a salary in addition to sales commissions, and some are paid solely by commission. Either way, sales commissions are the “lifeblood” of a salesperson. If someone messes with the commissions of a salesperson, they are going to hear about it. It’s how they earn their living and feed their families.

But what happens if the employment relationship ends? Does a salesperson have any right to commissions after they leave or are terminated?

What does the contract say?

This can be a very complicated question. There are a variety of factors that courts will look at in determining whether or not post-termination commissions may be owed to a salesperson who has resigned or been terminated. First and foremost, courts will look at whether or not the parties had a contract that dictated how post-termination commissions were to be handled. Such a contract can exist in an explicit, written form, but it can also arise from the course of dealings between the parties, or by way of commission plans that are clearly communicated to salespeople during their employment.

What if there is no contract?

In the absence of a contract, courts will sometimes look at what is the custom in the industry in order to determine whether, and if so to what extent, post-termination commissions may be owed to a former salesperson.

Was the commission “earned” prior to separation?

Another important factor is the extent to which the commission was “earned” by the salesperson before termination. If the salesperson, prior to separation from employment, had already done everything required of him/her in order to receive the commission, but the payment of the commission just didn’t happen to come due until sometime after separation, courts are more likely to find that the employee is legally  entitled to the commission. There is a saying that “the law abhors a forfeiture.” This means that the law does not like it when, through no fault of their own, someone is forced to “forfeit” money or property that they possess or have earned.

On the other hand, if a salesperson separated from employment when there was still work to be done for an account – for instance, if certain services were still needed from the salesperson after the sale had been made, and such services were not performed because the salesperson’s employment ended in the meantime – courts are less likely to find that the salesperson is legally entitled to the commission, since the commission arguably had not been fully “earned” at the time of separation.

Different treatment of employees versus independent contractors

It is also important to note that the treatment of sales commission issues are handled differently when the salesperson is an independent contractor, rather than an employee. Ohio, for instance, has a specific statute that addresses sales commissions earned by independent contractors. The statute is very favorable to the salesperson, in that it allows him or her to recover significant additional amounts beyond the unpaid commissions themselves. This statute does not apply, however, to employees.

Conclusion

Obviously, this is a very tricky and complex area of the law. Both companies and salespeople need to have knowledgeable legal counsel in their corner when facing issues involving disputed sales commissions.

Contact Stephen Imm (513-943-5678) or Matt Okiishi (513-943-6659) from the Finney Law Firm employment group for answers to any questions you may have on this topic.

Ohio Employment Law: US Department of Labor enacts new rule on overtime pay for salaried workers

Author By Matthew S. OkiishiPosted on

The U.S. Department of Labor has changed the salary level for exempted salaried employees. A prior iteration of this rule was famously (at least to employment law attorneys) declared illegal in 2016. However, the Department has been undeterred, and the new rule, which will go in to effect on January 1, 2020, has massive implications for businesses who classify employees as overtime exempt under the “white collar” or “EAP” exemption.

 

The white collar/EAP exemption exempts from the minimum wage and overtime pay requirements any employee employed in a bona fide executive, administrative, or processional capacity. In order to satisfy the exemption, an employee must: (1) be paid a predetermined and fixed salary that is not subject to reduction because of the quality or quantity of work performed (the “salary basis” test); (2) the salary must meet a minimum specified amount (the “salary level” test); (3) and the employee’s job duties must primarily involve executive, administrative, or processional duties (the “duties” test).The new rule changes the “salary level” test. Until January 1, 2020, the required salary must exceed $455 weekly ($23,660 annually). However, after January 1, 2020, the salary requirement will be raised to $684 weekly ($35,568 annually). To somewhat ease the burden this imposes on employers, the Department has also permitted employers to count nondiscretionary bonuses, incentives, and commissions toward up to 10 percent of the salary level ($2,556.80 annually).

As a result of these changes, on January 1, 2020, employers who do not raise their salaries to meet the new minimum, but otherwise satisfy the white collar/EAP exemption will find themselves exposed to potential overtime and/or minimum wage liability. If you are concerned that your pay policies may be out of compliance, consider speaking to one of the employment law attorneys at the Finney Law Firm: : Stephen E. Imm (513-943-5678) or Matt Okiishi (513-943-6659).

 

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