Department of Labor seeks to clarify compatibility of bonuses with fluctuating workweek method

By Michael B. Cohen

Among the alternatives for calculating overtime under the Fair Labor Standards Act, the fluctuating workweek method is perhaps one of the least familiar and used techniques. The fluctuating workweek method enables employers to pay overtime to certain non-exempt employees at one-half their regular rate, rather than one and one-half times their regular rate, if certain conditions are met:

(1) the employee’s work hours must fluctuate from week to week;

(2) the employee must be paid a fixed salary each workweek, regardless of the number of hours worked;

(3) the fixed salary must be large enough to compensate the employee at a rate of not less than the minimum wage for all hours worked;

(4) there must be a “clear mutual understanding” between the employer and the employee that the employee’s fixed salary is compensation for all hours the employee may work in a particular week; and

(5) the employee must receive additional pay at one-half the regular rate for all overtime hours worked.

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S Corporations: Dealing with Accumulated Earnings and Profits

Please send articles for the Tax Section blog to: Herman Spence at [email protected].

By Kerri L.S. Mast

C corporation income is generally subject to two levels of taxation.  It is taxed at the corporate level when earned and at the shareholder level when distributed.  An S corporation, on the other hand, generally is not taxed at the corporate level; its items of income and deduction flow through to its shareholders when earned.  Subsequent distributions by the S corporation to the shareholders often can be made tax-free.  However, the taxation of distributions is more complicated if the S corporation has C corporation accumulated earnings and profits (E&P).

An S corporation does not generate E&P.  However, it can possess E&P as a result of either converting from C corporation to S corporation or acquiring a C corporation.  E&P generated in a C corporation are subject to two levels of taxation – corporate and shareholder – and retain this character even if subsequently owned by an S corporation.  Accumulated E&P was taxed at the C corporation level and will be taxed again as a dividend to recipient S corporation shareholders when distributed.

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YLD Winter Quarterly Meeting Report

By Kristen M. Kirby
On Saturday, November 16, more than 30 young lawyers from across North Carolina gathered in-person and by phone for the YLD’s winter quarterly meeting in Wilmington.

During the meeting, we heard reports from our YLD officers and each of our 14 committees. It is safe to say that our committees have gotten off to a great start this bar year, and have many more exciting events to come!

Here are a just a few highlights of what our YLD committees are currently planning for the upcoming months:

 

  • The Civic Engagement Committee has organized a panel discussion on Paths to the Judiciary to be held in Cary on December 11 (if you are interested in attending, you can sign up here)
  • The Membership & Outreach Committee will hold a program on January 16 on the place of young lawyers in the profession, which will include a CLE component
  • The Wellness Committee is planning its Wellness Wednesday events for February 2020, with events to be held in Charlotte, Asheville, Raleigh and Winston-Salem
  • The Legal Feeding Frenzy will kick off this year’s food and fund drive supporting North Carolina food banks in late February 2020, with volunteer events to be held at each of our state’s food banks

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Significant K-12 Legislation from the 2019 Long Session

By Brian Gwyn

This session, the General Assembly passed several bills that that will impact K-12 education. Here are some of the highlights:

A brief description of each of these laws is provided below. For more detailed information about each bill, you can go to the bill status page on the General Assembly’s website (see corresponding links). For summaries of the laws, click “View Available Bill Summaries” on the left side of the webpage. Be sure that you are looking at the most current summary under the “Last Updated” column. Please note that even the most current summary may not reflect the final version of the law.

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Advocacy in your Local Community

By Jared Simmons

According to the Children’s Home Society of North Carolina, over 10,000 children in North Carolina are in the foster care system as of 2018.  Since 1983, the North Carolina juvenile system has supported the role of the Guardian ad Litem in each case to be a strong voice for children in the courtroom. In 2015, I observed a minor child describe the sexual abuse and exploitation they endured. The child testified their mother had sold access to them for opioids and other substances while in the mother’s custody. I was shocked and appalled, and I quickly learned there was a growing need in our communities for child advocacy.

In 2016, I was fortunate to have the opportunity to be trained as a Guardian ad Litem, and was assigned my first case; four children in my local community needed an advocate in the courtroom to pursue permanency and achieve stability. As the Guardian ad Litem for the children, I was able to get my first look into the development of an abuse/neglect/dependency case in North Carolina. After a few years of visits, hearings, and advocacy, all four of those children have achieved permanency.

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Small Firm Accelerator

Small Firm Accelerator offers education and networking opportunities to members of the Small Firm & Technology Section. Formerly called Starting out Solo, we have changed the name to Small Firm Accelerator to appeal to a larger group of members and offer a higher level of accessibility to our programming and events.

If you are part of a small firm or solo firm, just passed the Bar, or have been practicing for 5, 10, or 20 years and want to evolve your practice, you can benefit from the Small Firm Accelerator content and networking opportunities.  Topics include practice management, marketing, and technology.

The Small Firm & Technology Section serves members from across the state, but we realize that it is not always reasonable to travel to the live presentations and events held at the North Carolina Bar Center in Cary. To maximize the benefit to all our members, we will be live streaming and recording the live events at the North Carolina Bar Center making that content available under the Small Firm Accelerator section on the NCBA Small Firm & Technology webpage. We also encourage member firms to hold regional meetings across the state to broadcast the presentations and host networking events.  With your NCBA Small Firm & Technology Section membership, you can access these presentations at your own convenience by logging in to your NCBA account on the website.

For more information on upcoming events and newly posted content, visit https://www.ncbar.org/members/sections/small-firm-technology/.

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ICYMI: Trade in the Trump Era

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Pat Togni discusses “Trade in the Trump Era.”

On November 7, the International Practice Section held a Lunch and Learn titled “Trade in the Trump Era” at Poyner Spruill in Raleigh. Pat Togni from King & Spalding introduced the topic with an overview of the historical trade landscape. The Trump Administration’s activities, in part, are premised on the idea that while other countries have been actively pursuing their national interests, the United States historically has not been as aggressive as it should have been in trade negotiations to promote the interests of the United States.  The change in approach can be seen in at least three current administration objectives: (1) restoring U.S. manufacturing, as trade negotiations have been more heavily weighted in the past on other interests; (2) recognizing that a well implemented trade strategy can promote other policy objectives (e.g., serving as an additional “tool in the toolbox”); and (3) addressing the China “problem”, i.e., recognizing that the world’s second largest economy is not a market economy and fails to respect intellectual property.  These tactics have included unilateral actions/tariffs (to bring countries back to the negotiating table), bi-lateral vs. multi-country agreements, and a focus on leverage and supply-chain uncertainty.

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Interesting Reads and Other Helpful Resources for Government and Public Sector Attorneys


We’d like to highlight the University of North Carolina School of Government Survey. For those unfamiliar, the School of Government provides a wealth of information and resources for attorneys in our section. The survey should only take a few minutes and closes Friday, November 22, 2019.

“Electronic Records Day 2019: Social Media as a Public Record.” Mark Holland / October 10, 2019, Resources, State Archives of North Carolina. From the Article: “This year the Archives is focusing on social media.  Just like records in any other format, if social media posts (on Facebook, Instagram, Twitter, etc.) are created during the transaction of public business by state, local, or university governments, then they are considered to be public records by law.”

“Sales Tax 101 for Local Governments.” Chris McLaughlin / October 31, 2019, UNC School of Government. From the Article: “The one sales tax issue on which I frequently get questions from local governments concerns their liability to pay or charge sales taxes on their own purchases and sales.  The N.C. Department of Revenue (the “DOR”) recently released updated guidance on this issue, along with many others, in its Sales and Use Tax Bulletin (June 2019)(the “SUTB”). This blog summarizes what local governments need to know about the SUTB and about sales taxes in general.”

“Chapter 160D and Other Zoning Legislation.” Adam Lovelady / September 19, 2019, UNC School of Government. From the Article: “The General Assembly has enacted significant legislation affecting planning and development regulations in North Carolina. A newly released legislative bulletin summarizes the changes already enacted. The most significant land use legislation is the adoption of Chapter 160D, a new chapter of the General Statutes that consolidates the prior city- and county-enabling authority and implements a range of consensus clarifications and reforms. These changes will require updates to all local government development regulations by 2021.”

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Section CLE on Election Law, Campaign Finance, Redistricting and Related Issues is a “Must-Attend”

By Tom Segars

Are you keeping track of recent developments in North Carolina election law, campaign finance, gerrymandering litigation, and legislative redistricting?  If so, you know that merely following the news on these subjects could become a full-time job.

The Constitutional Rights and Responsibilities Section cordially invites you to take a deeper dive into these pressing issues at its December 13 Annual Section Meeting and CLE: Election Law, Money and Regulation in the Land of Fake News, Hyperpartisanship and the Twittersphere.  Come and learn from a uniquely knowledgeable group of lawyers, policy consultants, regulators, and legislators working on the front lines.

Links to the full program agenda and registration pages are set out below.  We hope to see you there!

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North Carolina Expands Civil Protections for Military Servicemembers

By Rick Conner

The North Carolina Servicemembers Civil Relief Act (“NCSCRA”), which took effect on October 1, 2019, expanded the rights of servicemembers and their dependents living in North Carolina.  The new law is codified in Article 4 of Chapter 127B, and can be found here.

The NCSCRA incorporates the federal SCRA (codified in Chapter 50 of Title 50 of the United States Code) into North Carolina law.  The federal SCRA, originally enacted in 2003 and amended several times since then, provides protections for members of the military who enter active duty, and covers issues such as rental agreements, security deposits, evictions, credit card interest rates, mortgage interest rates and foreclosures, civil judgments and proceedings, automobile leases, life insurance, health insurance, and income tax payments.

The NCSCRA expands beyond the scope of the federal SCRA by extending its protections to   include members of the North Carolina National Guard serving on active duty, and members of other states’ National Guard serving on active duty who live in North Carolina.

The NCSCRA also provides dependents (as defined in 50 U.S.C. § 3911(4)) of servicemembers some of the same rights and protections as servicemembers, including protections against default judgments, stays of certain proceedings including child custody, stays of certain fines or penalties under contracts, interest rate limitations, and tolling of statutes of limitations.

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