Court finds NCDOT's 25-year Property Freeze to be Unfair

The Supreme Court of North Carolina recently decided that it is illegal for a state government agency to institute an indefinite property "freeze" by forbidding improvement, development or subdivision by the landowner, only so that the government can buy it cheaply from the owner at some unspecified time in the future. If any other government agency wishes to deprive land-owners of use of their property, it is required by law that the acquisition be "for the greater good" and the NCDOT must also give the owners fair market value compensation for that deprivation. This is known as eminent domain. When the government does not pay for that property or the acquisition is not for the greater good, this is known as effectuating a "taking", which is illegal.

In the deciding case, Kirby v. NCDOT, the land-owning plaintiffs argued that because the North Carolina Department of Transportation's use of the North Carolina Map Act of 1987 prevented them from making any improvements or modifications to the property, the department had illegally deprived the land-owners of the use of their land. "The [Map] Act imposes certain restrictions upon property located within [an area planned for development by the NCDOT] for a certain period of time." The plaintiffs were directly affected by the Map Act when the NCDOT placed their property and others near it as a site for future highway construction and subsequently prohibited any development on the property for over twenty years.

The NCDOT claimed that this restriction on the plaintiff's property was intended to reduce their acquisition costs for future highway development. However, in the eyes of the Supreme Court of North Carolina, this cost-controlling mechanism did not rise to the level of "for the greater good." Instead, the Court held that the NCDOT's improper use of the Map Act was "inadequate to safeguard [the landowners'] constitutionally protected property rights" because the NCDOT was effectively commandeering private property for two decades, and not providing any compensation for it.

The estimated value of the property taken is $650 thousand. Though, as it stands, the case will be sent back down to a lower level of court to determine the exact value lost by the land-owners as a result of NCDOT's takings.

Obama's DAPA Program Blocked by U.S. Supreme Court Decision

On June 23, 2016, the Supreme Court of the United States ("SCOTUS") tied on its decision involving President Barack Obama's DAPA program; meaning, the program has not been rejected, but rather pushed back to the appeals level with the possibility of still being enacted at a later time.

In 2014, President Obama attempted to overhaul current immigration laws by enacting a program called Deferred Action for Parents of Americans and Lawful Permanent Residents ("DAPA"). This program concerns five million unauthorized immigrants, who are the parents of citizens or lawful permanent residents. These immigrants would be spared from deportation and be granted work permits in order for them to provide for their families by legally working in the U.S.A. This would positively affect the U.S. labor markets by reducing exploitation and distortion.

Usually, when the President of the United States of America wants to change a law, it must be passed through Congress. However, President Obama did not do so when he attempted to enact DAPA because he did not view it as a change in the law but rather as a change in the administration's prosecutorial discretion when deciding whether or not to deport an unauthorized immigrant. This caused 26 States (Texas as the leader) to challenge the President's executive action because they thought Obama was overstepping and abusing his power as the President by simply ignoring the set procedures for changing laws. These States wished for the adherence to the administrative procedures because if they were ignored, it would set a precedent that future presidents could change the laws without first going through Congress; thus, slowly crumbling the checks and balances system between the three executive branches of the U.S. Government.

Therefore, when the SCOTUS voted 4-4 on the issue, it did not reject the DAPA program, but returned it to the court of appeals, where it will be argued again. This means, there is still hope for a change in current immigration laws.

Historic Changes in Europe: How they may affect your business - Part 2

Brexit: Keep Calm and Carry On.

 

The votes are in. On June 23rd, 2016, the UK voted to leave the European Union (EU). The referendum passed by a slim margin with "Leave" wining by 52% to 48%. Following the vote, the mood from UK political leaders, EU leaders, and the financial sector is that of uncertainty. No one really knows what happens now. This air of uncertainty leaves many of us pondering what do we do now. In the short term the best answer seems to be Keep Calm and Carry On.

 

A true exit will take at least two years, as mandated by Article 50 of the Lisbon treaty. This intermediary period will be critical for the UK and the EU. During this time frame the UK will need to parse through thousands of EU rules and regulations, as it attempts to disentangle itself and its laws from the EU. In their stead, the UK will have to find the time and resources to implement new legal statutes and entities to cover those areas usually covered by the Union. All the while, the remaining 27 EU countries will have to agree on the terms of Britain's departure, without a British vote. This may spell trouble for the UK, if the EU decides to take a hardline approach in attempt to dissuade similar referendums by other members. A hardline tactic that harms Britain's economy, however, may harm Europe's as well.

 

The prognosis, in the short-term, of a true British exit is not stellar. The exit vote triggered a negative global market reaction. Almost immediately after the vote, the British pound fell by over 10% to $1.32 against the U.S. dollar, a 30-year low. The financial market's reaction to the UK's "leave" vote was swift and grim; investments do not thrive in uncertainty. Markets have, however, stabilized as the immediate shock of the vote has worn off. Nevertheless, a collapsed pound will drive up inflation up, pressing real incomes for many UK citizens. Some will lose their jobs. The British economy is big enough for a recession there to have a meaningful effect on Europe's economy.

 

Still, the UK has many decisions to finalize before the true effects of the referendum manifests. The Labour government has yet to invoke article 50; must decide on new leadership; and settle the rumblings of separatism all before the air of uncertainty will lift. Calm is warranted because it is also extremely likely, with regards to trade that a UK exit may, instead, be akin to a partial exit. The possibility remains that the UK will enter into a special agreement with the EU, just as many other countries have done. A relationship that will, perhaps, ensure continued free movement of people and goods between Britain and the EU.

 

It is too soon to tell what a British exit truly means. But for now, there are no plans for mass deportations of immigrants from the UK; and capital, goods, and services will still flow in and out of the UK. In this period of uncertainty, it is perhaps best to Keep Calm and Carry On.

Conclusion from previous article in our June newsletter: With regards to these historic changes in Europe, the general feeling is "wait and see." Overall, commentators believe the changes in Europe would not have significant negative, long-term effects on the currency or labor markets, or the overall global economy. Negative interest rates, a thing of economist's nightmares, are here to stay. What that means for long-term investment strategies and currency devaluation, as more and more Central banks implement such a strategy, is unknown. As for a British exit from the EU, it is uncertain what that means in terms of trade and labor. These unprecedented changes in Europe will no doubt have a far-reaching impact across multiple markets, but it is too soon to tell what that impact will be. For now, investors, employers, and Banks across Europe and the world have to "wait and see."

Employers May Be Required to Pay More Employees Overtime

The Department of Labor's ("DOL") new overtime rule, which takes effect on Dec. 1, 2016, makes millions more employees eligible for overtime pay. Under the Fair Labor Standards Act of 1938 (FLSA), salaried employees are guaranteed overtime for any hours they work beyond the standard 40-hour workweek, with exceptions to the rule based on both the employee's duties and salary level. The purpose of the FLSA is to protect employees from exploitation, but businesses need flexibility, so FLSA exempts bona fide salaried executive, administrative and professional employees, and many technology employees from overtime pay requirements. Most employees, however, are covered by the FLSA and must be paid at least federal and state minimum wage and receive overtime pay of 1.5 times their regular hourly rate when they work more than 40 hours in a week.

The most notable aspect of the DOL's new rule requires employers with employees earning up to $47,476 a year or $913 per week, to pay time-and-a-half overtime pay when employees work more than 40 hours during a week. The previous cutoff for overtime pay, set in 2004, was $23,660. The new salary threshold is equal to the 40th percentile of weekly earnings for full-time, salaried employees in the nation's lowest income region, currently the South. In order to ensure that the salary threshold stays at the 40th percentile benchmark, the rule requires an automatic update of the salary guidelines every three years.

The Labor Department estimates that an additional 4.2 million white-collar employees who earn above the old threshold but below the new one will now be entitled to time-and-a-half wages for each hour they work beyond a 40 hour work week. DOL contends that the new rule will set employers back $1.5 billion annually, with $1.2 billion in increased overtime pay and $300 million in corresponding administrative costs.

Despite the DOL's assurances, small businesses across the country are concerned about the cumulative effects that the new rule may have on their bottom lines. Notably, small businesses worry that under the new regulations they will have very few options when it comes to balancing wage payouts with productivity. For example, businesses might choose to keep salaries the same and cut or reduce overtime; raise salaries above the new threshold, so they will be no need to worry about overtime; lower base salaries of those who regularly work more than 40 hours, in expectation that overtime pay will make up the difference; or hire more employees to cover the extra hours from salaried employees. Some contend that instead of increasing salaries to raise employees above the overtime threshold, many businesses will simply reclassify professionals as hourly employees, removing their existing perks, flexibility, and certain benefits. Comp time, where employees work overtime in exchange for future days off, is not allowed for those eligible for overtime under the new regulation.

In any event, employers have another five months before the regulation goes into effect and should use this time to prepare. First and foremost before any decisions are made employers should figure out how many employees are close to new salary threshold and how many hours these employees are actually working. Additionally, employers should do their due diligence and ensure that any plan, reclassification, or salary changes is in full compliance with the requirements of the FLSA.