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PublicationsTHE HOWE & HUTTON REPORT PAGE ONE ARTICLE IF YOU GET THIS BOGUS IRS E-MAIL RE NEW “TAX SOFTWARE,” IGNORE IT! – The bad guys never give up with their attempts to infiltrate unsuspecting taxpayers’ computer systems or to obtain their confidential personal and financial information. A recent example, obviously a phony, purports to be from the IRS directing U.S. citizens to “update their computers with new tax software.” Just click on the embedded identifier and hit “open.” DON’T! It’s probably another virus and could well lead to loss of control of your computer system. This one is so obviously phony it hurts to think some taxpayers may follow the directions just because it says it is from the IRS. NY APPELLATE COURT THROWS OUT NY PASSENGERS RIGHTS ACT - H&H Report Update: On March 25 a federal appellate court in New York rejected the NY Passenger Bill of Rights Act enacted in late 2007. Ruling with unusual speed, the court said the NY Act invaded regulation of airline services which are within the exclusive control of the federal government. The Airline Transport Association, which challenged the Act, is crowing about the decision. This not only puts an end to the NY statute but will discourage similar laws elsewhere. CFO MAGAZINE REPORTS CREDIT IS TIGHT SO BUSINESSES MUST COLLECT – If your bank has tightened your credit and cash is tight, CFO recently advised businesses to become much stricter with collection efforts and to consider cutting off slow-pay and no-pay customers before major losses are incurred. Associations should consider similar steps if they note goods and services are not being paid for on a timely basis by members and nonmembers. This may be a sticky political situation, especially with members, but associations need to cut their losses too. ONE DOWN, HOW MANY TO GO? – A man who stole identity information over peer-to-peer (“P2P”) networks and used it to order merchandise which he then resold for a fraction of its value has been sentenced to 51 months in jail. He was the first person to be indicted for using P2P technology to do this. One down and how many to go? Be careful where you post any personal or financial information. NOT-FOR-PROFIT LAW DEVELOPMENTS CORPORATE TRAVEL DEPARTMENTS MAY FORM THEIR OWN ASSOCIATION – A group of Airline Reporting Corporation (“ARC”) accredited corporate travel departments (“CTDs”) is looking into establishing a stand-alone trade association with the support and assistance of ARC. CTDs are in-house travel departments. The organizer of the effort said a steering committee of ten CTDs see common interests in education and advocacy activities and possibly setting up a buying group as well. Benchmarking is another proposed activity. The group is currently seeking nonprofit corporate status in New York and moving ahead with a tax exemption application with the Internal Revenue Service. As so many associations have begun, representatives of a number of CTDs met at an industry meeting and concluded they had enough in common to explore moving ahead with their own trade association. The group sees a potential membership of 150 to 200 members. PLAINTIFF LOSES ON RESTRAINT OF TRADE AND GROUP BOYCOTT CLAIMS – The U.S. Supreme Court denied the appeal of a Wisconsin real estate broker who had lost on restraint of trade and group boycott claims against a local multiple listing service and its related local chapter of the state and national real estate brokerage associations. The appellate court decision discussed whether an earlier Supreme Court decision on per se vs. rule of reason analysis of tying and group boycott claims was still valid, noting the Supreme Court has passed up numerous opportunities to clarify the issue. The Supreme Court passed again. But the appellate court’s 2006 decision made clear that if an association offers membership on a nondiscriminatory basis at reasonable cost to those eligible, it will be very difficult to establish an antitrust claim against the association. REGULATORY LAW DEVELOPMENTS IDENTITY THEFT IS FTC’S NO. 1 FRAUD COMPLAINT FOR EIGHTH YEAR – Move over NY Yankees, New England Patriots, San Antonio Spurs, et al. When it comes to consistent performance it’s tough to top identity theft, which tops the Federal Trade Commission’s consumer fraud complaint list for the 8th straight year, accounting for 32% of the approximately 814,000 consumer fraud complaints received by the FTC. (The next highest category is shop-at-home/catalog sales at 8%.) Review your association’s website to ensure that sensitive personal information is at a minimum and financial transactions are carefully protected. Consider encryption of such data as one protection. SUPREME COURT DECIDES WHAT CONSTITUTES AN “ACTIONABLE CHARGE” – H&H Report Update: The U.S. Supreme Court recently ruled that an Equal Employment Opportunity Commission (“EEOC”) preliminary intake questionnaire constituted an “actionable charge” against a complaining employee’s employer. At stake was when the 60-day waiting period commences before an employee may sue the employer. The employer is supposed to receive notice from the EEOC of an “actionable charge,” and employers can use the 60-day period to try to settle with the employee. However, if the preliminary intake questionnaire or some similar statement is not provided to the employer by the EEOC but still constitutes an actionable charge, the employer may lose an opportunity to settle before the matter escalates, positions harden, and expensive litigation begins. While the Court’s opinion is does not specify what is technically needed for an actionable charge and said the EEOC’s regulations are less than clear, the Court defers to the EEOC to clarify its regulations. That’s small consolation to employers. EMPLOYMENT LAW DEVELOPMENTS SUPREME COURT LETS 401(k) PARTICIPANT SUE EMPLOYER FOR LOSSES – The U. S. Supreme Court has ruled that a 401(k) plan participant can sue his or her employer and defined contribution plan administrator for breach of fiduciary duties that impair the value of the plan assets of the participant. This decision is based on allegations by a plan participant that the administrator of his employer’s defined contribution plan had failed to follow his instructions regarding investments, leading to a loss of $150,000. The trial and appellate court dismissed his claims, following 1985 and 1996 Supreme Court precedents. But this Court distinguished its earlier decisions as applying to defined benefit plans which were the norm then, while defined contribution plans are the norm today. Without getting into the precise details of this decision (which sends the lawsuit back to the trial court for discovery and trial), the Supreme Court is saying that employers and plan administrators may be subject to ERISA claims for breach of fiduciary responsibility resulting in investment losses, as distinguished from investment losses not due to fiduciary breaches. That potential liability may be personal. Many association executives serve as plan administrators, so it behooves them to provide real oversight in this area of their responsibilities. EMPLOYEE LOSES ADA CLAIM BASED ON PERFUME ALLERGY - A woman who sued her former employer under the American With Disabilities Act (“ADA”) claiming a disability due to her being allergic to perfumes failed to convince a federal appellate court in Chicago to overturn summary judgment against her in the trial court. The appellate court said the ADA standard for a disability is an impairment that “[P]revents or significantly restricts an individual from performing a major life activity,” noting the standard is demanding. The court also said that she had failed to present any substantive medical evidence of her claimed medical condition and that her former employer had accommodated her condition. Allergy claims can be troublesome for employers to accommodate, but the trial and appellate courts here found little medical evidence to support her claim of disability and noted the employer’s accommodation efforts. One pointer: the court specifically commented there was no evidence her employer had regarded her as disabled, so keep that in mind when addressing such requests. “NO HIRE” AGREEMENT INCIDENT TO SALE OF A BUSINESS UPHELD – A federal appellate court in Chicago affirmed summary judgment in favor of Bank One and RCB Mortgage Company, a mortgage company in Indiana, denying claims by two terminated employees of tortious interference with employment, violations of Indiana’s antitrust statute and common law restraint of trade claims, and ERISA violation claims. Bank One sold a mortgage division to the RCB. As part of the deal Bank One agreed it would not rehire employees of the division for six months. RCB offered jobs to all division employees but the two plaintiffs rejected RCB’s offer and sought reemployment with Bank One which said no, based on the “no hire” provision. The appellate court affirmed summary judgment on all claims, and the U.S. Supreme Court recently denied certiorari. This decision is of relevance to associations and their vendors. Associations frequently include “no hire” provisions in agreements with vendors including management companies, software providers, meeting management companies, consultants and other service providers. Both parties seek such protection. “No hire” agreements entered into for proper business purposes should be upheld against claims of tortious interference, restraint of trade, etc., in most states. MEETING & TRAVEL LAW DEVELOPMENTS IF YOU USE A DEBIT CARD AT HOTELS, WATCH OUT FOR THIS – It is standard practice when you check in at a hotel that you will be asked for a credit card so the hotel has security for incidentals. But, according to a recent report in USA Today, if you give the hotel a debit card and the hotel quietly charges some predetermined dollar amount to your account (without your knowledge), that amount is immediately deducted from your checking account, and you may be unpleasantly surprised to learn that you are overdrawn or your next charge on the card may be rejected for being over the limit. Even if some or all of the charged amount is later credited to your account because you did not have charges for incidentals or the charges were less than the predetermined charge, the credit may be a while in catching up to the original charge. Association staff and selected others are often on a group’s master account but are asked for a card to secure payment for any incidental charges. One way to avoid the problem described is to not use a debit card. Another would be to ask about the hotel’s practice in this regard so you are aware of the possibility and can take steps to avoid being overdrawn then or later. NEW TWIST IN ATA APPEAL OF NY PASSENGERS RIGHTS LAW – H&H Report Update: On March 5, the day before oral arguments were to be heard on the appeal by the Air Transport Association (“ATA”) of New York’s Airline Passengers Bill of Rights Act passed last December, the U.S. Department of Transportation (“DOT”) issued its interpretation that state legislation which would affect airline operations is preempted by the Airline Deregulation Act. The comment was made in connection with DOT’s review of comments from an Advance Notice of Proposed Rulemaking (“ANPRM”) concerning DOT’s proposed tarmac-delay regulations. DOT said its tarmac-delay regulations when published in final form would also preempt state legislation. Between DOT’s interpretation and skeptical questioning on March 6 by the federal appellate panel hearing ATA’s appeal, it appears the NY Passengers Bill of Rights Act may be short-lived, and legislative proposals in other states will probably be put on hold pending resolution of the challenge to the NY legislation. PLAYING HARDBALL ON “REAL ID” – Some sixteen state legislatures have passed resolutions or legislation putting the Homeland Security Administration (“HSA”) on notice their states opposes the REAL ID Act passed back in 2005 requiring enhanced security built into drivers’ licenses or other similar state identification cards. The requirements are intended to make it much more difficult to obtain false identification for use in being permitted to board as a passenger on flights originating in the U.S., or for gaining entry into federal buildings or nuclear facilities. The tougher requirements are due in part to learning the 9-11 aircraft hijackers had over 30 forms of identification and hundreds of aliases among the 19 men involved. But states are balking on constitutional and privacy grounds at the estimated $4 billion to $15 billion cost to implement the costly new licenses and ID cards. The feds are playing hardball and saying if states do not implement the new license requirements or seek an extension of time by the end of March 2008 in which to comply even if they are on record as opposed to the new licenses, persons from those states will not be permitted to use their drivers’ licenses as acceptable proof of identification for airport boarding purposes. At present four of the 16 states – Maine, Montana, New Hampshire and South Carolina – have not requested the required extension of time to comply. Strange situation – the new licenses are not required until 2010, but residents of those states may be required to use passports, birth certificates or other ID acceptable to HSA beginning in mid-May. So after mid-May a traveler with an Illinois license could pass through airport security in Charleston, SC using a driver’s license that does not meet the requirements of the 2010 licenses while a SC resident with a similar license would have to use a passport or some other ID because SC opposes the new license requirements and did not ask for an extension. Association staff and members travel a lot. ID requirements are becoming more confusing. We have not heard the last of this. TAX DEVELOPMENTS ILLINOIS SUPREME COURT ASKED TO OVERTURN ADVERSE TAX RULING – A church operating a day care center has asked the Illinois Supreme Court to reverse an appellate court decision upholding an Illinois Department of Revenue ruling denying a property tax exemption to the church building housing the day care center. A critical question was how much religious instruction was given to the children at the center. One piece of evidence was a handbook given to parents listing 12 activities but only one mentioned religion. The appellate court agreed with the Department of Revenue that the center’s primary purpose was operating as a day care center, not as a place of religious instruction. This will be an uphill climb for the church. States and municipalities are not always inclined to see charitable purposes for separate activities similar to those operated for profit just because the sponsor is a religious, charitable or otherwise tax-exempt organization. IRS EXPLAINS ITS EXEMPTION COMPLIANCE EXAM PROCESS – The Internal Revenue Service issued an advisory in February providing a useful overview of its exemption compliance examination tools to determine if an exempt organization continues to qualify for its exemption and whether any discrepancies need to be addressed. The IRS has three examination tools: correspondence examinations, field examination and compliance checks (which are not examinations as such). The correspondence examination generally involves telephone calls and letters and usually focuses on one or two items in a return. If the exempt organization does not respond or provide the information sought, the IRS may take other steps to obtain the information. A field examination is an on-site in-person examination by one or more IRS agents for a much more thorough review of an organization’s records. Depending on the size of the organizations and its complexities, the IRS may send an individual or a team of agents. Examinations may take a few days or go on for a year or more. The third process is a compliance check which involves an IRS specialist looking at a specific item on a return. The IRS club in all three processes is to expand the scope of the compliance check or correspondence exam into a field audit. Initial cooperation is more likely to keep an examination limited in scope. INTELLECTUAL PROPERTY & COMPUTER LAW DEVELOPMENTS INTERNET PROVIDER NOT LIABLE FOR DISCRIMINATORY AD – A federal appellate court in Chicago declined to hold Internet provider craigslist.com for ads which violate the Fair Housing Act’s prohibitions against discrimination in housing. The ads included such statements as “no children” and “non-women of color need not apply,” among others. But the court relied on a provision in the Communications Decency Act (the “CDA”) which states an Internet service provider shall not be regarded as the publisher of information posted on the provider’s website by a third party. This issue continues to percolate at the state and federal trial and appellate levels because numerous ads are posted on craigslist.com and similar websites which violate fair housing statutes, solicit persons to commit criminal acts (e.g., a woman solicited the murder of her husband), and otherwise run afoul of laws. The CDA provides cover to Internet service providers who would find it difficult to sort out all the ads posted daily on websites around the nation (and other cities around the world) to determine if they violated the law of the city or state where posted. The court did point out that plaintiffs could go after the parties providing the content posted on craigslist.com and similar sites. Associations should monitor any content posted on their websites in blogs or chat rooms. OTHER ISSUES, TRENDS & DEVELOPMENTS SEARCH TRACKING PRIVACY BILL PROPOSED IN NY – Many people using search engines such as Yahoo, Google and the like are not aware their individual searches are collected by search engine providers, compiled as information about the individual’s interests and eventually sold to advertisers who can then target the individual with ads based on his or her search patterns. A NY state legislator has introduced legislation that would ban using such individual information without an individual’s consent. In effect the proposed legislation would require the search engine providers to offer individuals an opt-out on collecting and selling data to advertisers about their browsing habits. There is no federal legislation on this yet although the Federal Trade Commission has recommended voluntary privacy guidelines. If enacted the NY bill could lead to similar legislation in other states. The lobbyists for the search provider companies and some major advertisers are already fighting the proposed legislation. We all have a stake in this one. TSA ADDRESSES ANOTHER SECURITY CONCERN – The Transportation Security Administration is seeking proposals for computer cases that can pass TSA muster when travelers carry their laptop computers through airport security stations. The intent is that travelers would not have to remove their computers from the carry-on bags for inspection. Don’t hold your breath waiting for this one to come to pass. H&H DEVELOPMENTS In March: John M. Peterson will be presenting the details of employers’ obligations under the new Employment Verification (I-9) Form to an association. Naomi R. Angel completed a two day workshop on the international standard ANS/ISO/IEC 17024 for personnel certification accreditation. The objective of this standard is to achieve and promote a globally accepted benchmark for bodies managing the certification of persons. She is happy to share information regarding the program with all interested parties. Nathan J. Breen discussed risk management with a government meeting planning group. Gerard P. Panaro published an article in the January/February 2008 edition of the HR Advisor entitled “You’ve Received an EEOC Charge in the Mail: Now What?” Contributors to this issue... This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or professional service through its distribution. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Past newsletters are available at www.howehutton.com by clicking on “Publications.” Howe & Hutton, Ltd.: Washington Office: St. Louis Office: E-Mail: hh@howehutton.com ©Copyright 2007. Howe & Hutton, Ltd. 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