In latest edition of The Wright Toolbox:
- To Arbitrate Or Not To Arbitrate, That Is The Question – read now
- Employer Leave Donation Programs Benefiting COVID-19 Victims (IRC §170) – read now
To Arbitrate Or Not To Arbitrate, That Is The Question
According to the AAA, over a recent two year period there were over 8,300 commercial cases filed with the AAA. The total amount of claims and counterclaims in each year was between $12 and $13 Billion.
The proponents of arbitration contend that arbitration is faster, cheaper and more streamlined than litigation and the case is decided by an arbitrator or panel of arbitrators that are knowledgeable about the construction industry, as opposed to judges or juries who may have no knowledge or experience with the industry. Detractors of arbitration cite: (1) the legal rules and defenses may be loosely applied and/or ignored in arbitration; (2) arbitrators are perceived to allow personal concepts of fairness to override the facts/law; (3) very limited appellate review; (4) limited discovery and disclosure of defenses/claims which can lead to last minute surprises or ambushes at the hearing; (5) limited explanation of awards.
Let’s look at two of the primary arguments regarding arbitration – speed and finality. First, looking at whether arbitration is really faster, according to federal court statistics the median length of a jury or bench trial in civil cases was 27.2 months – over 2 years. In light of the COVID-19 shut downs, case times have extended out even further. In comparison, the AAA contends that in construction cases the median time from filing of a case with the AAA to award is typically 232 days, less than 8 months. Second, looking at finality, the AAA has introduced an optional appellate arbitration procedure. Under this procedure the parties can agree in their contract or stipulate after the fact to submit an arbitration award to review by a AAA appellate panel. The parties or the AAA can appoint the appellate panel. The appeal will be determined based on the record and briefs submitted in accordance with a schedule and page limits. Oral arguments are permitted based on request and at the discretion of the panel. After 30 days the panel must either (i) adopt the underlying award, (ii) substitute its own award or (iii) request additional information and time to render a decision. The entire appeal process is designed to take less than 3 months. There is an administrative fee and fees for the appellate panel, and if a cross appeal is filed there is another administrative fee. The appeal may be based on the grounds that the underlying award is based on: (1) an error of law that is material and prejudicial; or (2) determinations of fact that are clearly erroneous. The grounds for appeal under the appellate rules are much broader than the traditional grounds for a court to vacate an arbitration award.
If you have concerns about arbitration, perhaps it’s time to take a fresh look.
Employer Leave Donation Programs Benefiting COVID-19 Victims (IRC §170)
The IRS recently provided guidance for employers whose employees forgo sick, vacation or personal leave because of the COVID-19 pandemic. Notice 2020-46, 2020-27 I.R.B. __ (June 29, 2020), IR-2020-119.
As a result of the COVID virus, President Trump issued major disaster declarations for each of the 50 states, the District of Columbia, and five U.S. territories. The IRS notice provides guidance on the federal income and employment tax treatment of cash payments made by employers under leave-based donation programs to aid victims of the ongoing COVID-19 pandemic in the affected geographic areas.
Under leave-based donation programs, employees can elect to forgo vacation, sick, or personal leave in exchange for cash payments that the employer makes to charitable organizations described in Internal Revenue Code (IRC) section 170(c.) Contributions made to a domestic public charity that is qualified under IRC section 501(c)(3), or made to a state or possession of the United States and the District of Columbia for public purposes all qualify under IRC section 170(c.)
The notice provides that if the payments are (1) made to IRC section 170(c) organizations for the relief of victims of the COVID-19 pandemic in the affected disaster relief areas and (2) are paid to the organizations before January 1, 2021, then the cash payments will not be treated as wages (or compensation, as applicable) to the employees or otherwise be included in the gross income of the employees. The electing employees may not claim a charitable contribution deduction with respect to the value of forgone leave. The employer may deduct the cash payments under the rules of IRC section 170 or the rules of IRC section 162 (deduction for all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business) if the employer otherwise meets the respective requirements of either section.