Prejudgment Interest: A Consideration For Almost Every Cost Of Defense Debate

By Kirstin Heffner, The McCalmon Group, Inc.

September 25, 2017

Workers won a four-year battle over one city’s new $15 per hour minimum wage law. The $2 million settlement announced this week by Washington’s Department of Labor and Industries involves back pay and interest for more than 150 employees of two car rental agencies at Seattle-Tacoma (SeaTac) International Airport. Some workers will receive checks for as much as $30,000 as a result of employers paying lower hourly wages while they disputed the law in court.

Voters in SeaTac, a city of 29,000 that surrounds the airport, narrowly passed the minimum wage law in 2013. When the law took effect in 2014, some employers refused to pay the new minimum. In 2015, Washington’s Supreme Court upheld the law, and ruled that it also applies to employers at the airport, which is operated by the Port of Seattle.

Last September, settlements in two dozen cases brought by airport transportation and hospitality services workers resulted in more than $12 million in back payments for current and former workers.

The largest payment, $8.2 million, was made by an employer of baggage handlers and ramp workers. Seven hundred thirty-eight workers had been paid just $12 an hour. Another airport employer will pay 291 workers nearly $2 million to settle wage and hour claims under the new law, while still another will pay more than $1.8 million to 152 workers. Rick Anderson “Rental car workers at Seattle airport win nearly $2 million in lawsuit over $15 minimum wage,” http://www.latimes.com (Sep. 7, 2017).

The SeaTac settlement demonstrates the additional cost of litigation when an employer is required to pay prejudgment interest. According to the settlement described in the source article, the car rental agencies agreed to pay back wages totaling $1.51 million, plus an additional $458,651 in interest. This large settlement amount resulted, even with the state agreeing to waive penalties.

The Fair Labor Standards Act (FLSA) and state laws regulate wage rates. A common remedy for wage violations is that the employer makes up the difference between what the employees were paid and the amount they should have been paid. This is referred to as “back pay.”

The U.S. Department of Labor (DOL) or a private individual may bring a lawsuit for back pay and liquidated damages. Liquidated damages, in the purist sense, are damages agreed to by the parties during the formation of a contract that establishes how much the injured party will collect if there is a breach. In a wage and hour case, however, liquidated damages are a set amount of damages established by the FLSA or state law.

Prejudgment interest is another remedy available when an employer violates wage and hour law. The FLSA does not specify prejudgment interest as a remedy, so federal courts do not always agree on whether it should be awarded. State laws also vary. However, prejudgment interest is usually awarded in place of liquidated damages to account for the lost use of money from the time the employer owed the wage until the time of payment.

Federal courts generally calculate the rate of interest applied to U.S. Treasury bills. State courts generally use their statutory interest rate for judgments. So, in addition to an award of back pay, an employer may be required to pay prejudgment interest on those unpaid wages accumulated since the time they were owed. This can be especially costly in the case of wage claims when litigation drags out, which it usually does, over several years.

The lesson for employers that find themselves in a wage and hour dispute is that prejudgment interest can be significant, should they lose. For this reason, they should always consult with their attorney on the issue when weighing the costs of litigating the lawsuit versus settling. It is important to discuss the issue sooner rather than later because prejudgment interest will continue to accrue, and accrue, and accrue.

October 3, 2017 0

Extension Filers: Deadline is Monday, Oct. 16; Prior-Year Adjusted Gross Income Amount May Be Needed to File Electronically

Extension Filers: Deadline is Monday, Oct. 16; Prior-Year Adjusted Gross Income Amount May Be Needed to File Electronically

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How to Use Get Transcript Online: English

WASHINGTON – The Internal Revenue Service has an important reminder for taxpayers who filed for an extension and face an Oct. 16 filing deadline: The adjusted gross income (AGI) amount from their 2015 return may be needed to electronically file their 2016 tax return.

For those taxpayers who have a valid extension and are in or affected by a federally declared disaster area may be allowed more time to file. Currently, taxpayers impacted by Hurricanes Harvey, Irma and Maria as well as people in parts of Michigan and West Virginia qualify for this relief. See the disaster relief page on IRS.gov for details.

As a reminder, taxpayers should keep a copy of their tax returns and supporting documents for a minimum of three years. Prior year tax returns are even more important as the IRS makes changes to protect taxpayers and authenticate their identity.

Extension filers should plan ahead if they are using a software product for the first time. They should have kept a copy of their 2015 tax return or if not, will need to order a tax transcript, a process that may take five to 10 calendar days. The AGI is clearly labeled on both the tax return and the transcript.

Taxpayers who prepare their own electronic tax returns are required to electronically sign and validate their return. Using an electronic filing PIN is no longer an option. To authenticate their identities, taxpayers will also need to enter either of two items: their prior-year AGI or their prior-year self-select PIN and their date of birth. If married filing jointly, both taxpayers must authenticate their identities with this information.

Generally, tax-preparation software automatically generates the prior-year AGI and/or self-select PIN for returning customers. However, taxpayers who are new to a software product must enter the prior-year AGI or prior-year self-select PIN themselves.

How to Find AGI; Plan Ahead if a Mailed Transcript Needed

The adjusted gross income is gross income minus certain adjustments. On 2015 tax returns, the AGI is found on line 37 of Form 1040; line 21 on Form 1040A and line 4 on Form 1040EZ. Taxpayers who e-filed and did not keep a copy of their original 2015 tax return may be able to return to their prior-year software provider or tax preparer to obtain a copy.

Those who lack access to their prior-year tax returns also may go to irs.gov/transcript and use Get Transcript Online or Get Transcript by Mail. A transcript is a summary of the tax return or tax account. There are various types of transcripts, but the Tax Return Transcript works best. Look for the “Adjusted Gross Income” amount on the transcript.

Taxpayers must pass Secure Access authentication in order to access Get Transcript Online and immediately access their transcripts. Those who cannot pass Secure Access authentication should use Get Transcript by Mail or call 800-908-9946, and a transcript will be delivered to their home address within five to 10 calendar days.

October 3, 2017 0

US Tables Proposal Aimed at Limiting the Yarn-Forward Exceptions in NAFTA Renegotiation by Sheng Lu

US Tables Proposal Aimed at Limiting the Yarn-Forward Exceptions in NAFTA Renegotiation

by Sheng Lu

According to Inside US Trade, in the third round the NAFTA renegotiation (September 23-27, 2017), the United States has put forward several possible changes to the existing rules related to textile and apparel in the agreement:

USTR proposes to eliminate the tariff preference level (TPL) in NAFTA. The goal of eliminating TPL is to limit the exceptions to the yarn-forward rules of origin and “incentivize” more production in the NAFTA region as advocated by the U.S. textile industry.
As a potential replacement for TPL, USTR also proses to add a short supply list mechanism to NAFTA, but details remain unclear (e.g., whether the list will be temporary or permanent; the application process).
USTR further proposes a new chapter devoted to textile and apparel in NAFTAin line with more recent agreements negotiated by the U.S.. The current NAFTA does not include a textile chapter.

USTR’s proposal to remove TPL in NAFTA has met strong opposition by the U.S. apparel industry, fashion retailers, and brands as well as their partners in Mexico and Canada. According to these industry groups:

Eliminating TPLs would disrupt supply chains that have been in place for more than two decades.
Eliminating TPLs would not siphon Chinese production back to the U.S. but would instead further incentivize sourcing from outside the NAFTA region and put textile and apparel factories in the region out of business. This is because certain yarns, for example, are not produced in the region but can be produced inexpensively outside of it and imported through a TPL to the NAFTA region, where it could be used in a finished product that would still be considered originating.
Without the TPL, companies would opt to produce textile and apparel products in the least expensive way possible, likely outside the NAFTA region, and ship items into North America despite being hit with most-favored-nation (MFN) tariffs.
A short supply list would not ease the supply chain disruptions that would result from the removal of the TPLs because there is no guarantee products formerly subject to the TPL would make it onto a new NAFTA short supply list.

A potential compromise could involve a reduction in Canadian and Mexican TPLs to the U.S. and an increase in the U.S. TPLs to Mexico and Canada, which could boost the U.S. trade surplus in textiles and apparel with its NAFTA partners and throw a bone to the U.S. textile industry by ostensibly incentivizing domestic production.

Fact-check about TPL

TPL was included in NAFTA as a compromise for adopting the yarn-forward rules of origin in the agreement. Before NAFTA, the US-Canada trade agreement adopted the less restrictive fabric-forward rules of origin.

The TPL mechanism has played a critical role in facilitating the textile and apparel (T&A) trade and production collaboration between the United States and Canada, in particular, the export of Canada’s wool suits to the United States and the U.S. cotton or man-made fiber apparel to Canada. Statistics from the Office of Textiles and Apparel (OTEXA) show that in 2016 more than 70% of the value of Canada’s apparel exports to the United States under NAFTA utilized the TPL provision, including almost all wool apparel products. Over the same period, the TPL fulfillment rate for U.S. cotton or man-made fiber apparel exports to Canada reached 100%, suggesting a high utilization of the TPL mechanism by U.S. apparel firms too (Global Affairs Canada, 2017). Several studies argue that without the TPL mechanism, the U.S.-Canada bilateral T&A trade volume could be in much smaller scale (USITC, 2016). Notably, garments assembled in the United States and Canada often contained non-NAFTA originating textile inputs, which failed them to meet the “yarn-forward” rules of origin typically required for the preferential duty treatment under NAFTA.

October 3, 2017 0