I am sure your life, like mine, got upended a week ago.
As crazy as life is now, somethings remain constant.
Yesterday, I snapped a beautiful sunset.
Michigan Governor’s Executive Order 2020-21
The State of Michigan is continuing to update and offer guidance on businesses complying with Governor Gretchen Whitmer‘s Executive Order 2020-21. Check out this helpful FAQ.
House Bill 5701. This Proposed Bill Would Impose Penalties Against Businesses that take Adverse Action against Certain Employees During a Declared Emergency. The Bill has been in committee since March 17.
“Commodities and Emergency Services and Supplies Price Protection Act.” The name says it all. Check out all 9 pages of HB 5670
Let me end this post on a serious note. If you are reading this blog, chances are you a leader. You are leading in your sphere of influence in one way or another.
This crisis that we find ourselves in is full of opportunities to do great things. To be “others-minded”. To lead well.
So much has changed since my last update on March 13. I was in court that day for a commercial landlord.
I would not have known that a few weeks later I would be working remotely due to Executive Order 2020-21 – placing law firms under the category of “non-essential businesses” and sending us home.
Below is the last photo I took from my office – Monday, March 23. It was a snowy, dreary day. Downtown was, and remains empty.
Updates
Since then, The Michigan Governor’s Executive Order 2020-19 has put a halt on residential tenant eviction actions until April 17, 2020. I would be very surprised if this is not extended to a later date.
One of the complexities is the lack of uniformity with the various states and municipalities. Some, particularly cities in California, have issued an “eviction moratorium” on residential and commercial tenancies. Some broaden the restrictions, prohibiting the landlord from increasing rent payments, charging late fees, etc…
In Michigan, the EO applies only to residential tenants (including those under land contracts). It carves out an exception and permits emergency evictions in the event a tenant poses a: “Substantial risk to another person” or “imminent and severe risk to property.”
Further, this EO does not remove a tenant’s obligation to continue to pay rent as otherwise required under the lease. However, Landlords cannot “make a demand for payment by personal delivery.”
Recently, to further assist tenants and others who cannot afford to pay for essential utilities, the Governor signed EO 2020-28 which restores water services to occupied residential homes.
Commercial Landlords?
EO 2020-19 and 28 does not apply to commercial properties.
However, the Michigan Supreme Court has ordered trial courts, in compliance with the “Shelter Order” EO 2020-21 to close except for “essential functions”.
Eviction of commercial tenants is not on the list of “essential functions.”
This has put many landlords and tenants in difficult situations. Check out this Detroit Free Press article from this morning describing the negative impact on tenants and landlords.
Landlords are rightfully concerned that this could have a domino effect – if tenants do not pay rent, does that relieve landlords from the obligation to pay their mortgage, utilities, taxes?
So far, the Governor of Michigan has not mentioned the possibility of rent cancellation. No Bill in the legislature has been proposed recently on that topic.
Currently, the only Bill recently introduced in the Michigan legislature: “The Hotel and Lodging Price Protection Act” – an eleven page bill that would prohibit hotels and other temporary accommodations from price increases during the declared emergency.
What this means for Landlords:
You still have a right to get paid under your lease.
The rights of a landlord during this pandemic are ever changing. Keep aware of the changes.
Landlords – commercial and residential – will not have access to the courts for evictions until at least April 17 (likely longer) unless the situation is an emergency (physical harm – imminent and severe risk to property”).
Landlords and Tenants are both feeling the pain. It may be worth considering coming up with creative resolutions for the time being.
The sunrise has been beautiful the last few days in Grand Rapids. Every day is a new day to be thankful for.
At the same time, our world is facing a pandemic, a disruption to our lives, the likes of which we have never seen and will hopefully never see again.
I am writing now from home. Yesterday I took a photo – (the last photo for a while!) of my office view over Rosa Parks Circle in downtown Grand Rapids. I got in the office and the world was covered in snow.
Winter was back.
The empty, snow covered, dreary city somewhat symbolizes how a lot of us are probably feeling. Alone, isolated, depressed.
I am reminded of that popular exchange in C.S. Lewis’ The Lion, The Witch, and the Wardrobe:
“It is winter in Narnia,” said Mr. Tumnus, “and has been for ever so long…. always winter, but never Christmas.”
Kinda feels like that.
Given the Executive Order from Governor Whitmer that was issued effective Midnight this morning, businesses all over the State have been scrambling to understand and implement. There has been and remains a lot of confusion.
Simply put, the effect of EO-2020-21 is that a lot of us will have more empty space in our lives than we are used to.
Below is a photo I took a few days ago of downtown Grand Rapids – Lyon Street, specifically. More specifically, the skywalk between the DeVos Place and the Amway Grand Plaza Hotel.
View of Lyon Street from the Skywalk in Downtown Grand Rapids
Empty.
There seems to be a lot of space.
A lot of margin.
(Ironically, one of my regular commitments is to try and keep more margin in my life – well, I am getting it.)
I realize my reality is different than the many who are sick.
There are many in need.
If you are fortunate enough to be healthy like me, maybe you are finding margin in your life in this crazy time.
If you are like me, I have a question for you: what are you doing with your margin?
So far, its been an interesting read. I like how Adam highlights real people, like David Hornik and Peter Audet and tells their stories as “givers” in their professional lives.
One of Adam’s comments stuck with me though:
“We tend to compartmentalize giving, reserving a different set of values for the sphere of work.”
Interesting phenomenon.
Many of us may be focused on doing right to our neighbor, our families. But when we find ourselves in the workplace, in the business world, we have a completely different mindset.
A “me first” mindset.
Today is a new day. An opportunity to be “other-minded”
I am reminded of one of my favorite scripture verses:
“Do nothing out of selfish ambition or vain conceit. Rather, in humility value others above yourselves, not looking to your own interests but each of you to the interests of the others.”
Philippians 2: 3-4
Wherever you find yourself, there are opportunities to think of others.
On Friday I was in court for a landlord and the Courts were delaying entering the judgments against a tenant if a tenant failed to appear.
Today I received a call from a court clerk informing me that jury selections on another case were being suspended without issuing a future hearing date.
The 61st District Court has issued a Media Release holding on landlord/tenant hearings in abeyance until after May 1. Thank you to the Kent County RPOA for informing me of this.
All over the country courts are placing a moratorium on evictions. I read today that New York is placing a moratorium on evictions indefinitely.
Nothing like a pandemic to highlight the tension between property owners trying to keep their properties from going in the red v.s. keeping tenants from becoming homeless.
Nothing like a pandemic to stir in others to do good – treat others how they would want to be treated.
Case in point, I had a client reach out to me to discuss creative resolutions for those tenants experiencing temporary financial hardships due to the coronavirus.
I think this client is on to something.
This client is treating others the way they themselves would want to be treated.
Your good friend who you haven’t seen in years is falling on hard times. You invite friend to move in to your place, just until he gets his feet underneath him.
He decides he likes your place and he isn’t willing to leave.
What do you do?
Call the police?
This Bill would treat your friend as a “trespasser” – if he’s present for less than 30 days. This would allow you to simply call the police and have him removed, as opposed to serving him with a notice to terminate tenancy and evict him through the court system.
The morning sunrise is so rare this time of year in Michigan and it had some particularly interesting effects this morning so I had to snap this photo.
sunrise in downtown Grand Rapids, Michigan
One of the questions that I routinely get from business clients, can a business owner install video recordings in businesses?
The answer has some caveats because there are various legal protections in place to protect the right to privacy – both criminal laws and civil.
In general, so long as the videos:
a. do not record audio and
b. are in locations that are not “private” which would infringe on individual’s reasonable expectation of privacy (e.g. – bathrooms) monitoring is ok.
Michigan’s Eavesdropping Law – cannot record audio of third parties.
Michigan law specifically prohibits the willful use of a device to eavesdrop on a conversation without the prior consent of all parties. See MCL §750.539c. Case law has confirmed that a party to the conversation can lawfully record audio – but not a third party. This would generally make it unlawful for a surveillance camera to record audio without the consent of all parties.
Michigan’s Surveillance Law – can record unless it invades a private place
Michigan law creates a criminal and civil cause of action for invasion of privacy, which Michigan has long recognized as a common-law tort. Lewis v. LeGrow, 258 Mich. App. 175, 178, 670 N.W.2d 675, 680, 2003.
Under Michigan Law, MCL 750.539(d)
A person shall not do either of the following:
Install, place, or use in any private place, without the consent of the person or persons entitled to privacy in that place, any device for observing, recording, transmitting, photographing, or eavesdropping upon the sounds or events in that place.
Distribute, disseminate, or transmit for access by any other person a recording, photograph, or visual image the person knows or has reason to know was obtained in violation of this section.
Does not Apply to Residences – New Michigan Bill would ClarifyThis
This section does not prohibit security monitoring in a residence if conducted by or at the direction of the owner or principal occupant of that residence unless conducted for a lewd or lascivious purpose.
This Bill would simply make clear that it does not apply to any device for purposes of security monitoring, so long if done in compliance with applicable statute.
The Purpose of the Eavesdropping Statute
Michigan case law has held that “The essence of [the statute] is to protect against the secret, nonconsensual photographing of an event in a place where the person secretly photographed would reasonably expect to be safe from such “surveillance,” Mich. Comp. Laws § 750.539a(3)” Lewis v. LeGrow, 258 Mich. App. 175, 178, 670 N.W.2d 675, 680, (2003).
People in a private place have a “reasonable expectation of privacy”. The Statute , Section 539a, defines “private place” to mean: “a place where one may reasonable expect to be safe from casual or hostile intrusion or surveillance but does not include a place to which the public or substantial group of the public has access.”
The Michigan Court of appeals has further clarified the definition of “private place”.
“The definition of “private place” must afford protection from two alternative types of intrusion, “casual or hostile intrusion” or “surveillance,” and also not be “a place to which the public or a substantial group of the public has access.” Thus, to qualify as a private place the area must be one in which a reasonable person would expect not to be disturbed by the appearance of another person or be subject to surveillance and the area also must not be one to which the general public has access.” Lewis v. LeGrow, 258 Mich. App. 175, 178, 670 N.W.2d 675, 680, (2003)
Simply put, the Michigan legislature intended that private places are places where a person can reasonably expect privacy.
Happy Tuesday, all. Well, we are in February now, which, if you live in the Midwest means you are hoping for a glimpse of sun and looking for brighter and warmer days. I am reminded of my trip 6 months back to Amsterdam and the beautiful canals.
Amsterdam Canals, Netherlands
A client recently inquired about whether or not he needed to file his LLC’s annual statement in order to stay in good standing with the State of Michigan.
“Section 909(2) of the Michigan Limited Liability Company Act, 1993 PA 23, provides that if a domestic or foreign professional limited liability company does not file the annual report by February 15, then in addition to its liability for the fee, a $50.00 penalty is added to the fee.”
“Penalties will be assessed for 2018 annual reports received after March 1, 2018.”
Further LARA reports that, an LLC that “fails to file its annual statement/report or the filing fee is not paid for two years, the limited liability company will not be in good standing. The status of the limited liability company will be “active, but not in good standing.”
“A limited liability company that is not in good standing is not entitled to a certificate of good standing; its company name will be available for use by another entity, and no document will be filed on behalf of the company other than a certificate of restoration.”
Is your LLC in Good Standing?
Occasionally I will have a business client come in and I will ask – just to make sure – “is your business still in good standing?”
The common answer is “I think so.”
And of course, after I perform a quick internet check with the State of Michigan it is all too common that I discover that either the LLC is “not in good standing” or worse, the company has been dissolved automatically for failure to file annual statements.
A Word on Resident Agents:
My law firm is happy to provide our business clients with resident agent services. One of the benefits of an LLC is that it provides its owners a level of privacy protection.
You can check out a recent ABAJournal Article on how a Court is making Jared Kushner’s real estate partners disclose their identity.
Michigan law requires Limited Liability Companies to have appointed a Resident Agent.
MCL 450.4207(1)(b) requires an LLC to have a resident agent. A person, or business with a physical presence in the State of Michigan.
Michigan law does not require that an “owner” of the LLC be the resident agent.
“The resident agent appointed by a limited liability company is an agent of the company upon whom any process, notice, or demand required or permitted by law to be served upon the company may be served.” MCL 450.4207(1)(b).
Many of my real estate investment clients will utilize my law firm as resident agent when filing their articles of organization with the State of Michigan.
In Conclusion:
Business owners, if you get these annual statements from the State of Michigan, or from your attorney – do not disregard them! Maintain your Corporate Formalities.
Here’s a shot of Downtown Grand Rapids I took today from the Amway Grand Plaza Skywalk.
Pearl Street, Grand Rapids, Michigan
A month ago I posted on non-compete agreements.
As mentioned before, I am thankful for Judge Yates with the Kent County Business Court who issues a lot of opinions on this area. In fact, he issued one just a few days ago that is helpful:
In this instance, a local hair salon (where I used to get my hair cut until they moved from downtown) had their stylists sign non-competes.
The stylists left their employer to work with a competitor. The salon filed an Ex-Parte TRO to stop the stylists from working for a competing hair salon.
The Court, in its opinion, granted in part and denied in part the Salon’s request. The Court (at least before a hearing on the evidence) allowed the stylists to work for a competitor and limited the TRO simply to prohibit the stylists from soliciting customers of their former employer.
A broad takeaway from this brief opinion – yes, non-competes are generally enforceable, but not in all cases. The restrictions must be reasonable.
A question to ask: Is it reasonable to prohibit a hair stylist from going to another salon and using the stylists’ general knowledge and skill to cut hair somewhere else?
Is a business really harmed by this type of competition?
Trending to protect low-wage workers from unreasonable restrictions.
Just recently, Michigan’s Attorney General joined the Attorney Generals of several states in a letter to the FTC dated November 15, 2019 to ” to urge it to use its rulemaking authority to bring an end to the abusive use of non-compete clauses in employment contract.”
This isn’t a recent phenomenon. Several years ago Jimmy Johns was sued by a State Attorney General for its use of non-competition agreements to restrict employees rights to “make sandwiches” for a competitor.
According to the Report, the changes to the Bill surround the definition of “Low-Wage Employee”
Low-wage employee would mean either of the following: 1. A minor. 2. An employee, as defined in section 203 of the federal Fair Labor Standards Act who receives annual wages from the employer (excluding overtime) at a rate less than 138% of the last published federal poverty line for a family of three. The bill would require the Department of Labor and Economic Opportunity (DLEO) to keep this rate posted on its public website.
It seems there is a growing trend to protect employees from unreasonable restrictions on the ability to work. States are pushing for limitations on non-competes against employees – particularly employees in lower skilled jobs.
And it is hard to argue with sensibility of binding “sandwich artists” or “hairstylists” from making a living. That being said, under Michigan law non-competes are general enforceable.
MCL 445.774a provides:“1) An employer may obtain from an employee an agreement or covenant which protects an employer’s reasonable competitive business interests…”
According to a December 31 article posted on MLive, this company will have to pay “32 former employees $59,212 in back wages and an equal amount in liquidated damages.”
Calling a worker an IC just to save on paying taxes may seriously hurt your business in the long run. States are enacting laws to make businesses pay for such misclassifications.
New Laws Penalizing Businesses for Misclassification
Back in September 2019 California passed a Bill to correct misclassification of workers as Independent Contractors
Around the same time, Michigan proposed a similar Bill, House Bill 4877
HB 4877 would place the burden on the employer to prove, by a preponderance of evidence, that the employee was not misclassified – with the threat of penalties.
That Bill was referred to the committee on commerce and tourism and has made no movement.
Court Cases go Back and Forth on the Issue
As reported by the ABAJournal, The 9th Circuit Court of Appeals, provided a victory for FedEx Truck Drivers classified, by their employer FedEx, as “independent contractors” – reversing “a finding in multidistrict litigation in Indiana and held that nearly 2,700 plaintiffs in California and Oregon are in fact employees.” See the ABAJournal article here
Different Tests to Determine IC vs EE
States, Federal Government agencies, and Courts all have their own standards of how to distinguish independent contractors from employees.
Look at the Code of Federal Register, as provided by Cornell Law School, for the definition of Employee and you will get one definition; go to the IRS website and you will find another extensive resource on the subject, see that resource here. States have their own rules, statutory and case law, as well.
One of the reasons for the lack of uniformity, is that the distinction between IC/EE matters for different reasons – from the federal government’s perspective, it matters, among other things, from a Federal tax stand point- or whether or not an EEOC , or fair labor standards act claim is at issue. From a state law perspective, the distinction can matter regarding unemployment/workers compensation taxes and claims.
Under Michigan law, 3 conditions must be met in order to find an individual is an employee for purposes of Workers Disability Compensation Act Claims, MCL 418.11(1)(d) – employee means every person performing service in the course of the trade, business, profession, or occupation of an employer at the time of the injury, provided the person in relation to this service does not maintain a separate business, does not hold himself or herself out to and render service to the public, and is not an employer… McCaul v Modern Tile and Carpet, Inc 284, Mich App 610, 616 ( 2001)
The Fed Ex Case
As reported by the ABAJournal:
“Under a “right to control” test that applies in both states (California and Oregon), the FedEx drivers are clearly employees, not independent contractors, a three-judge appellate panel held.”
“The drivers must wear FedEx uniforms, drive FedEx-approved vehicles, and groom themselves according to FedEx’s appearance standards,” wrote Judge William Fletcher in both opinions. “FedEx tells its drivers what packages to deliver, on what days, and at what times. Although drivers may operate multiple delivery routes and hire third parties to help perform their work, they may do so only with FedEx’s consent.”
The fact that FedEx called the drivers independent contractors in an operating agreement did not change their actual status as employees, the court said.”
Take Away:
This last point made by the 9th Circuit Court of Appeals cannot be under stated- how you decide to label your workers is not going to determine their true status as either IC or EE. How are your workers actually operating? E.G. – Do you truly have control over their duties to the extent that they are effectively employees?
Definitely a conversation you may want to have with your legal and tax counsel.
Last Friday was the tree lighting in downtown Grand Rapids. The Christmas season is officially here!
Rosa Parks Circle, Grand Rapids, MI
A question that comes up often in my business practice: “when are non-competes enforceable?”
I am thankful for Judge Yates with the Kent County Business Court who issues a lot of opinions on this area. In fact, he issued one just a few days ago that is helpful:
In this instance, a local hair salon (where I used to get my hair cut until they moved from downtown) had their stylists sign non-competes.
The stylists left their employer to work with a competitor. The salon filed an Ex-Parte TRO to stop the stylists from working for a competing hair salon.
The Court, in its opinion, granted in part and denied in part the Salon’s request. The Court (at least before a hearing on the evidence) allowed the stylists to work for a competitor and limited the TRO simply to prohibit the stylists from soliciting customers of their former employer.
A broad takeaway from this brief opinion – yes, non-competes are generally enforceable, but not in all cases. The restrictions must be reasonable.
A question to ask: Is it reasonable to prohibit a hair stylist from going to another salon and using the stylists’ general knowledge and skill to cut hair somewhere else?
Is a business really harmed by this type of competition?
Trending to protect low-wage workers from unreasonable restrictions.
Just recently, Michigan’s Attorney General joined the Attorney Generals of several states in a letter to the FTC dated November 15, 2019 to ” to urge it to use its rulemaking authority to bring an end to the abusive use of non-compete clauses in employment contract.”
This isn’t a recent phenomenon. Several years ago Jimmy Johns was sued by a State Attorney General for its use of non-competition agreements to restrict employees rights to “make sandwiches” for a competitor.
It seems there is a growing trend to protect employees from unreasonable restrictions on the ability to work. States are pushing for limitations on non-competes against employees – particularly employees in lower skilled jobs.
That being said, under Michigan law non-competes are general enforceable.
MCL 445.774a provides:“1) An employer may obtain from an employee an agreement or covenant which protects an employer’s reasonable competitive business interests…”
Two Lessons:
Non-competes are generally enforceable – a court will narrow the scope of such a restrictive covenant if a court believes necessary in order to protect a legitimate business interest.
Non-competes are less likely to be enforceable against low-level positions with no access to proprietary information.
What really impacted me about my visit was touring the space on Straight Street in Grand Rapids where roughly 80 kids aged 6-18 meet every weekday after school.
These kids will receive snacks, dinner, and interaction with adults who care about them.
Many of these kids may not have positive interactions with adults.
The staff and volunteers of B&G Club are telling these kids on a consistent basis that they matter.
They have inherent value.
A Vision to Assure Kids That Success is Within Reach.
its Vision is “to provide a world class Camp and Club Experience that assures success is within reach of every young person who enters our doors, with all members on track to graduate from high school with a plan for the future, demonstrating good character and citizenship, and living a healthy lifestyle.”
Relationships Change lives.
I had originally met Patrick and Angie at a luncheon held at Mel Trotter Ministries, another community partner along with B&G Club serving the most vulnerable in our community.
I love this quote that is often spoken of at Mel Trotter Ministries – “People don’t become homeless when they run out of money. They become homeless when they run out of relationships.”
That is our job.
Being those relationships for the most vulnerable.
Not just “one-way relationships” but truly reaching out in community in a sustainable way.
Keep up the good work Patrick, Angie, Taylor and Team at B&G Club! B&G Club would love to partner with you if you want to learn more about the work they are doing in our community. I encourage you to check out their website.
Jeshua Lauka's Business and Real Estate Law Blog 