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IRS Circular 230 Disclosure. Tax advice set forth in this communication is not intended or written to be used, and cannot be used, by the taxpayer, for.

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Presentation on theme: "IRS Circular 230 Disclosure. Tax advice set forth in this communication is not intended or written to be used, and cannot be used, by the taxpayer, for."— Presentation transcript:

1 IRS Circular 230 Disclosure. Tax advice set forth in this communication is not intended or written to be used, and cannot be used, by the taxpayer, for the purpose of avoiding penalties that may be imposed upon the taxpayer. Public Employment and Pension Law Update Colorado Municipal League Colorado Municipal League May 30, 2008 Sybil Kisken, Esq. Of Counsel Davis Graham & Stubbs LLP and Cindy Birley, Esq. Partner Davis Graham & Stubbs LLP Tel: (303)

2 2Sybil Kisken and Cindy Birley of DGS LLP OVERVIEW  Recent Supreme Court Decisions  The Evolution of Garcetti  Family & Medical Leave Act Changes  Classification & Pay Issues  New I-9  Revising Municipal Policies & Darr v. Telluride  Qualified Retirement Plan  Determination Letter Process  Pick-up Contributions  Public Contracts for Services

3 3Sybil Kisken and Cindy Birley of DGS LLP RECENT SUPREME COURT DECISIONS  Federal Express Corp. v. Holowecki (2/27/08) Holding: Completed EEOC intake questionnaire form and 6- page affidavit qualified as a “charge” under ADEA Any document that can reasonably be construed as a request for action to protect the employee’s rights constitutes a discrimination “charge” EEOC urged to consider revisions to its forms and procedures to “reduce the risk of further misunderstandings”

4 4Sybil Kisken and Cindy Birley of DGS LLP RECENT SUPREME COURT DECISIONS (cont’)  Sprint/United Mgmt. Co. v. Mendelsohn (2/26/08)  Holding: Tenth Circuit improperly concluded that “me too” should have been allowed as evidence of discrimination in employee’s discrimination case stemming from her termination. Employee sought to introduce evidence of five former employees who claimed they were discriminated against by different supervisors, in different divisions.  Evidence is not per se admissible or per se inadmissible; the facts of each case must be considered.

5 5Sybil Kisken and Cindy Birley of DGS LLP RECENT SUPREME COURT DECISIONS (cont’)  CBOCS West Inc. v. Humphries (5/27/08) Holding: Section 1981 encompasses retaliation claims.  Watch for Engquist v. Oregon Dep’t of Agriculture (argued 4/21/08) Issue: Whether public employees may bring “class of one” equal protection claims; Ninth Circuit said “no” because “to forbid arbitrary or malicious firings of public employees would completely invalidate the practice of public at-will employment”

6 6Sybil Kisken and Cindy Birley of DGS LLP EVOLUTION OF GARCETTI v. CEBALLOS  Garcetti v. Ceballos, 547 U.S. 410 (2006) held: “When public employees make statements pursuant to their official duties, the employees are not speaking as citizens for First Amendment purposes, and the Constitution does not insulate their communications from employee discipline.”  In the two years since the decision, courts have grappled with whether speech is part of an employee’s official duties, or whether it is that of a private citizen

7 7Sybil Kisken and Cindy Birley of DGS LLP EVOLUTION OF GARCETTI v. CEBALLOS (cont’)  Elements of First Amendment retaliation claim: 1.Was speech made as part of official duties or as private citizen on a matter of public concern 2.If as private citizen on matter of public concern, does employee’s interest in commenting upon matters outweigh interest of the employer in promoting efficiency 3.If balance tips in favor of employee, employee must show speech substantial or motivating factor in detrimental action 4.Employer may demonstrate it would have taken same action in absence of speech

8 8Sybil Kisken and Cindy Birley of DGS LLP EVOLUTION OF GARCETTI v. CEBALLOS (cont’)  Casey v. West Las Vegas Independent School Dist., 473 F.3d 1323 (10 th Cir. 2007): Employee complained to the federal government about school board’s lack of compliance with Head Start regulations = OFFICIAL DUTIES Employee complained to New Mexico Attorney General about school board’s lack of compliance with open meetings law = PRIVATE CITIZEN

9 9Sybil Kisken and Cindy Birley of DGS LLP EVOLUTION OF GARCETTI v. CEBALLOS (cont’)  Clark-Wine v. Colorado Springs, 2008 WL (D. Colo. 2008): Employee terminated as manager of real estate services. Court analyzed 7 “expressions”: 1. Participation on committee to discuss gender discrimination issues in city = OFFICIAL DUTIES—even though voluntary, report given to City manager only, no individualized expression

10 10Sybil Kisken and Cindy Birley of DGS LLP EVOLUTION OF GARCETTI v. CEBALLOS (cont’) 2, 3, 4, 5. Activities/comments regarding sale/transfer/use of property = OFFICIAL DUTIES; facts considered included that expressions were on City’s system or letterhead, within job description, not expressed outside institutional channels 6.Request for audit of employee’s division = OFFICIAL DUTIES; “as manager... employee is inherently responsible for managing its activities... and alerting City officials to any perceived noncompliance”

11 11Sybil Kisken and Cindy Birley of DGS LLP EVOLUTION OF GARCETTI v. CEBALLOS (cont’) 7.Memo to employee relations manager = INTERNAL PERSONNEL CONCERN, on City stationary, signed with her job title, not published outside of City channels But see Ashcraft v. Beicker, 2008 WL (D. Colo. 2008): Deputy sheriff complained to undersheriff that sergeant was spreading false rumors about deputy sheriff’s wife’s sexual promiscuity = PUBLIC CONCERN because complaint questions the integrity of and alleges impropriety by a police officer

12 12Sybil Kisken and Cindy Birley of DGS LLP FAMILY & MEDICAL LEAVE ACT CHANGES  Servicemember Family Leave  FMLA amended effective January 28, 2008 to permit a spouse, son, daughter, parent or next of kin (defined as “nearest blood relative”) to take up to 26 workweeks of job- protected leave to care for a member of the Armed Forces, including a member of the National Guard or Reserves, who is undergoing medical treatment, recuperation, or therapy, is otherwise in outpatient status, or is otherwise on the temporary disability retired list, for a serious injury or illness.”

13 13Sybil Kisken and Cindy Birley of DGS LLP FMLA CHANGES (continued)  Expanded scope of leave: “Qualifying exigency”  The FMLA also has been expanded to allow 12 weeks of traditional FMLA leave for “qualifying exigency... arising out of the fact that the spouse, or a son, daughter or parent of an employee is on active duty (or has been notified of an impending call or order to active duty) in the Armed Forces in support of a contingency operation.”  Term “qualifying exigency” to be defined by FMLA regulations at some unknown date

14 14Sybil Kisken and Cindy Birley of DGS LLP FMLA CHANGES (continued)  Combined total of no more than 26 workweeks  No more than a total of 26 workweeks of leave may be taken under the FMLA, whether Servicemember Family Leave or a combination of Servicemember Family Leave and traditional leave  Examples: - 12 weeks birth of child + 14 weeks to care for service member -12 weeks “qualifying exigency” + 14 weeks to care for service member -26 weeks to care for service member -6 weeks for birth of child and 6 weeks for “qualifying exigency”

15 15Sybil Kisken and Cindy Birley of DGS LLP FMLA CHANGES (continued)  Proposed New FMLA Regulations  U.S. Department of Labor issued proposed new FMLA regulations substantially overhauling initial FMLA regulations and providing new certification forms.  Comment period ended April 11,  Stay tuned for publication and implementation...

16 16Sybil Kisken and Cindy Birley of DGS LLP FMLA DECISION  Bass v. Porter (10 th Cir. 2008):  FMLA claim dismissed because not brought within 2-year statute of limitations since employee could not rely on 3-year statute of limitations applied only to “willful” violations  Court adopted FLSA definition of “willful” for FMLA purposes: employer “knew or showed reckless disregard for whether its conduct was prohibited by FMLA”  Employer fired employee for excessive absenteeism when he failed to submit sufficient FMLA certification by deadline

17 17Sybil Kisken and Cindy Birley of DGS LLP CLASSIFICATION & PAY ISSUES  Employee versus Independent Contractor  Misclassification of workers cost federal government estimated $34.7 billion in unpaid taxes between 1996 and 2004  30% of IRS audits this year will be based on employee classification issues  IRS software allows it to note when employers give W-2 and 1099 to the same person in a year

18 18Sybil Kisken and Cindy Birley of DGS LLP CLASSIFICATION & PAY ISSUES (continued)  U.S. House Bill 6111 (introduced 5/21/08) would amend FLSA to clarify that misclassification of individuals is a prohibited act  Would require employers to keep records and notify workers of their status as employee or independent contractor  Would allow for liquidated damages and civil penalties  U.S. House Bill 5804 (introduced 4/15/08) would amend Internal Revenue Code to clearly define an independent contractor and increase penalties for violating

19 19Sybil Kisken and Cindy Birley of DGS LLP CLASSIFICATION & PAY ISSUES (continued)  Exempt versus Non-Exempt from Overtime  In January, Golden company paid $842,000 in back wages for failing to pay overtime. Because some exempt employees were not paid the minimum weekly rate of $455/week, the entire job classification lost its exemption  New issue: Overtime claims for use of technology (Blackberries, cell phones, , etc.); consider developing policy

20 20Sybil Kisken and Cindy Birley of DGS LLP CLASSIFICATION & PAY ISSUES (continued)  DOL opinion letter on shift substitutions by public employees (3/17/08)  Employee may substitute for another employee if public employer approves the substitution and the substitution is solely at the option of the involved employees  Employer is not required to pay overtime for the additional hours worked for which the substituting employee was not originally scheduled to work

21 21Sybil Kisken and Cindy Birley of DGS LLP NEW I-9  Make sure you are using the new I-9 issued in late 2007  Handbook with instructions, and discussion of issues related to new I-9, available to download at:

22 22Sybil Kisken and Cindy Birley of DGS LLP REVISING MUNICIPAL POLICIES & DARR v. TELLURIDE  Darr v. Telluride, 495 F.3d 1243 (10 th Cir. 2007)  Darr hired in 2001 as deputy marshal pursuant to town’s personnel policies and procedures. Manual contained disclaimer that it was not a contract. In 2002, Darr and other employees notified of proposed revisions to policies and opportunity to provide comments. New policies passed and requirement of opportunity for notice and hearing before being terminated was omitted. Darr signed acknowledgment form regarding new policies.

23 23Sybil Kisken and Cindy Birley of DGS LLP REVISING MUNICIPAL POLICIES & DARR v. TELLURIDE (continued)  In 2003, Citizen Advisory Board created to facilitate communication about health and safety issues. CAB critical of policing methods, and Darr. CAB’s chair discussed Darr on a local radio show. In 2003, Darr was terminated for, among other things, his “aggressive and heavy-handed demeanor.” Darr sued.  Old policy and new policy contained disclaimer that no contractual relationship created by policies

24 24Sybil Kisken and Cindy Birley of DGS LLP REVISING MUNICIPAL POLICIES & DARR v. TELLURIDE (continued)  No procedural due process violation in changing policy because: (1) old policies had a contractual disclaimer and indicated “under revision”; (2) notice was sent to employees that policies were being revised; (3) employees notified of hearing date to provide comments; (4) employees could ask questions and make comments at the hearing; (5) employee signed acknowledgment of new policies; (6) new policies had a contractual disclaimer.  No liberty interest violation for CAB’s statements because CAB is not legislative body, not imbued to speak on behalf of town, no input into personnel decisions, and CAB’s conduct did not reflect official town policy or custom.

25 25Sybil Kisken and Cindy Birley of DGS LLP REVISING MUNICIPAL POLICIES & DARR v. TELLURIDE (continued)  No breach of contract or promissory estoppel claim based on old policies’ termination procedures.  No violation of substantive due process, although court noted that “[a] public employee with a property interest in continued employment has a substantive due process right not to be terminated for arbitrary or capricious reasons.”

26 26Sybil Kisken and Cindy Birley of DGS LLP QUALIFIED RETIREMENT PLAN  Why is qualified status for retirement plans important? –Employer contributions not taxable to members when made (only when distributed) –Earnings not taxed to trust or members until distributed –Favorable tax treatment to member when distribution received (i.e., rollover to IRA) –Certain plans qualify so that members (and employer) are exempt from Social Security taxes

27 27Sybil Kisken and Cindy Birley of DGS LLP QUALIFIED RETIREMENT PLAN (continued)  What is a qualified retirement plan?  Plan meets requirements of Code Section 401(a)  Assets held in trust and for exclusive benefit of members and beneficiaries

28 28Sybil Kisken and Cindy Birley of DGS LLP DETERMINATION LETTER PROCESS  IRS Determination Letter for 401(a) Qualified Plans  Staggered filing cycles:  Governmental plans filing cycle: February 1, 2008 to January 31, 2009  Increased Scrutiny of Governmental Plans  Questionnaire to be sent to 200 government plan representatives  Failure to reply could open a compliance check

29 29Sybil Kisken and Cindy Birley of DGS LLP PICK-UP CONTRIBUTIONS Pre-tax treatment for Code Section 414(h) employer pick-up contributions –Contributions “picked-up” by employing unit treated as employer contributions –Excluded from gross income of employee until distribution to employee Revenue Ruling – Formal Action Required Prior to January 1, 2009

30 30Sybil Kisken and Cindy Birley of DGS LLP PUBLIC CONTRACTS FOR SERVICES Illegal Aliens – Public Contracts for Services –C.R.S. Sections – 101 et seq. –Requires contractors, when entering into public contract for services, to verify legal status of their employees through federal basic pilot program SB –Changes definition of “basic pilot program” to “E-verify,” program’s new name

31 31Sybil Kisken and Cindy Birley of DGS LLP PUBLIC CONTRACTS FOR SERVICES (continued) –Excludes from definition of “public contract for services,” agreements relating to:  offer, issuance or sale of securities  agreements for investment advisory services or fund management services, and  grants, awards or contracts for higher education research –Creates state program as alternative to E-verify, that requires contractor to verify legal status of newly hired employees

32 32Sybil Kisken and Cindy Birley of DGS LLP APPENDICES Appendix ISybil Kisken, Esq. Resume Appendix IICindy Birley, Esq. Resume

33 33Sybil Kisken and Cindy Birley of DGS LLP SYBIL KISKEN, ESQ. RESUME Sybil Kisken is Of Counsel at Davis Graham & Stubbs LLP with over 15 years of experience in employment and labor law, including almost 10 years working as an Assistant City Attorney for the City and County of Denver. When she left the City, she was the Assistant Director of the Litigation Section of the City Attorney’s Office, overseeing eight lawyers practicing exclusively in employment and labor law. She also supervised for a period of time the attorneys handling personal injury and excessive force claims against the City. Sybil has handled cases at all levels, including cases before Colorado’s state and federal district courts, the Colorado Court of Appeals, the Colorado Supreme Court, and the U.S. Court of Appeals for the Tenth Circuit. She also has filed briefs with the U.S. Supreme Court. In addition to her litigation experience, Sybil advises clients regarding all types of employment-related matters, including those involving allegations of discrimination, harassment and retaliation, and medical-related issues (which frequently implicate the Americans with Disabilities Act, the Family and Medical Leave Act, and worker’s compensation law). Sybil also advises on issues unique to public sector employment, including constitutional claims. She approaches each case or client question with both legal expertise and practical insight. Contact Information: (303) Davis Graham & Stubbs LLP th Street Suite 500 Denver, CO 80202

34 34Sybil Kisken and Cindy Birley of DGS LLP Education/Professional Associations Juris Doctorate, summa cum laude, University of Arizona, Tucson, Arizona, 1990 B..A., magna cum laude, in Speech Communication, University of Alaska, Fairbanks, Alaska, 1987 American Bar Association Colorado Bar Association Denver Bar Association Board of Directors, Rocky Mountain Chapter of the French-American Chamber of Commerce Board of Trustees, Denver International School SYBIL KISKEN, ESQ. RESUME (continued)

35 35Sybil Kisken and Cindy Birley of DGS LLP CINDY BIRLEY, ESQ. RESUME Cindy Birley is a Partner at Davis Graham & Stubbs LLP with over 20 years of experience in the employee benefits and executive compensation field. Ms. Birley’s practice emphasizes benefit plans for the public sector and tax-exempt employers. She has in-depth knowledge of the Internal Revenue Code and the Employee Retirement Income Security Act of 1974 (“ERISA”). Ms. Birley’s expertise includes designing and drafting all types of qualified and nonqualified plans and health and welfare plans. Designs and drafts 403(b) tax-sheltered annuity plans, money purchase pension plans, defined benefit pension plans, including 414(h) pick-up plans, Deferred Retirement Option Plans (DROP Plans), 457 and other deferred compensation plans, and other plans for public sector and tax-exempt employers. Has extensive experience with public sector and tax-exempt employers, including experience with many city plans, county plans, statewide systems, and plans for school districts and churches. Drafts legislation to be incorporated into state statutes and local ordinances. Contact Information: (303) Davis Graham & Stubbs LLP th Street Suite 500 Denver, CO Employee Benefits Experience for Public Sector and Tax-Exempt Employers Ms. Birley:

36 36Sybil Kisken and Cindy Birley of DGS LLP Public Sector and Tax-Exempt Employee Benefits Experience (cont’d.) Designs and drafts retiree health savings plans (and integral part trusts), 401(h) accounts and VEBAs. Performs comprehensive compliance audits and reviews. Regularly advises Retirement Boards and Boards of Trustees. Consults plan administrators on administration and plan interpretation issues. Regularly coordinates with City Attorneys, County Attorneys and Assistant Attorneys General regarding public sector plan issues. Provides guidance on governmental domestic relations orders, including preparation of numerous model domestic relations orders for complex retirement plans. Has submitted to, negotiated with, and obtained from IRS numerous determination letters and private letter rulings for plans for public sector and tax-exempt employers. Provides advice regarding fiduciary liability, reporting and disclosure, distribution issues and excise taxes. CINDY BIRLEY, ESQ. RESUME (continued)

37 37Sybil Kisken and Cindy Birley of DGS LLP Education/Professional Associations LL.M. in Taxation, University of Denver, Denver, Colorado, 1990 Juris Doctorate, University of Michigan, Ann Arbor, Michigan, 1984 B.B.A., summa cum laude, in Accounting, University of Iowa, Iowa City, Iowa, 1981 Certificate as a Certified Public Accountant in the State of Iowa American Bar Association Colorado Bar Association Denver Bar Association American Society of Pension Professionals & Actuaries National Association of Public Pension Attorneys Denver Chapter of the Western Pension & Benefits Conference Colorado Municipal League CINDY BIRLEY, ESQ. RESUME (continued)

38 38Sybil Kisken and Cindy Birley of DGS LLP Publications “Compliance Issues for Qualified Plans,” 52nd Annual Tax Institute (University of Denver Graduate Tax Program, July 25-26, 2002) “New Trends in Public Sector Plans,” Trusts & Estates (September 2001) “Deferred Retirement Option Programs” (co-authored with Kent Eichstadt), The NAPPA Report (February 1998) Federal-State Reference Guide for Social Security Coverage and FICA Reporting by State/Local Government Employers, A Federal-State Cooperative Publication (July 1995) (“Federal-State Reference Guide”) (Ms. Birley was a contributor) “Participant-Directed Accounts in Retirement Plans: 1991 DOL Proposed Regulations” (co-authored with Deborah K. Distler), The Colorado Lawyer (November 1991) “Plan Design: Flexible Compensation” (co-authored with Richard A. Rose), Benefits Law Journal (Autumn 1990) Awards Received the Hammer Award in 2001 from Vice President Al Gore’s National Partnership for Reinventing Government for her contribution to the Public Employers Compliance Strategy Team in creating the Federal- State Reference Guide. Ms. Birley is recognized in the 2008 edition of The Best Lawyers in America in Employee Benefits Law. CINDY BIRLEY, ESQ. RESUME (continued)


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