The Law Firm of Bucknam Black Davis PC

What you should know about employment discrimination

What you should know about employment discrimination

Employers and employees are usually aware that discrimination in the work place is illegal. The definition of illegal discrimination, however, can be difficult to understand. As I have shared with clients in the past, it is not illegal for a boss to be a lout.   But when does questionable behavior cross the legal line? Knowing the answer can protect both the employer and the employee.

Generally speaking, discrimination happens when an employee (or potential employee) is treated differently than other employees. There are a variety of legal reasons for an employer to “discriminate” between employees- skill levels, experience, length of time on the job, etc. Discrimination becomes illegal when the employee is treated differently because they belong to a particular category of people. Our legal system recognizes that throughout our nation’s history certain segments of society have been treated differently in the work place for reasons that have nothing to do with job performance. Anti-discrimination laws establish “protected classes” as a means of leveling the employment playing field. Thus, “discrimination” becomes “illegal discrimination” when an employee is treated differently than others solely because the employee is a member of a protected class.

Federal anti-discrimination employment laws

There are a number of federal laws that define “protected class.”  The Civil Rights Act of 1964 prohibits employment discrimination based on the employee’s race, color, religion, sex or national origin.  The Age Discrimination Act of 1967 protects employees over the age of 40. The Americans with Disabilities Act of 1990 prohibits employment discrimination against qualified individuals with disabilities in the private sector and within state and local governments. (A 1973 law prohibits disability discrimination by federal government employers.) These are just a few of the federal laws that govern employment relationships.

Unlawful discrimination is defined by federal laws in a variety of ways. “Unlawful discrimination” can include harassment based on the basis of membership in a protected class. It includes retaliation against an individual for filing a charge of discrimination, participating in an investigation or opposing the employers discriminatory conduct.  Employer decisions based on stereotypes or assumptions about members of a protected class constitutes illegal discrimination, as does denying employment opportunities to someone because that person is married to a member of a protected class.

Unlawful discrimination also includes employment practices which, while not necessarily targeting a specific individual, have an adverse impact on employees simply because of their membership in a protected class. For example, a school systems policy of only hiring new teachers with less than 5 years experience has been found to be age discrimination. Even though the policy did not specifically prohibit hiring anyone over a particular age, the impact of the policy disproportionately disadvantaged older teachers. The school system could offer no legitimate business interest for its hiring policy and as such was in violation of federal law.

An employer can be held responsible for discrimination in the workplace even when the discrimination is not a result of the employer’s own conduct. An employer can be liable for unlawful discrimination when the employer knowingly allows the existence of a “hostile work environment.” Such an environment exists when employees are subjected to harassment (ridicule, intimidation or insults) by other employees because of their membership in a protected class. If the employer becomes aware of the situation and fails to take corrective measures the employer may be subjected to a claim of unlawful discrimination.  While a court may ultimately find that employee behavior was merely offensive and did not rise to the pervasiveness necessary to establish unlawful discrimination, the employer runs a serious risk in not taking complaints about employee conduct seriously.

Federal anti-discrimination laws make it illegal to discriminate in the hiring and firing of employees based on their membership in a federally-defined protected class. But they also apply to a wide range of other employment related activities: compensation, assignment and classification of employees; transfers, promotions, layoffs and recalls; job advertisements, recruitments and testing; use of company facilities; access to training programs; and pay, retirement plans, disability leave and fringe benefits.

Whether federal anti-discrimination law will apply to a particular private employer typically depends upon the number of employees. One notable exception is the Equal Pay Act of 1963 which prohibits sex-based wage discrimination (paying one gender less for doing substantially the same work as their opposite gender colleagues.)  This law applies to all employers who are covered by the Federal Wage and Hour Law, which is virtually all employers.

Vermont and New Hampshire anti-discrimination employment laws

Both Vermont and New Hampshire have their own anti-discrimination laws in addition to the federal laws. In both states the laws are known as the “Fair Employment Practices Act.” In Vermont the laws apply to every employer; in New Hampshire they apply to employers with six or more employees. New Hampshire also excludes from the definition of employer (for purposes of fair employment practices) certain social clubs, fraternal organizations and religious associations.

The federal and state laws are similar in many respects. One noteworthy difference, however, is the definition of “protected class.” New Hampshire defines “protected class” to include marital status and sexual orientation (prohibiting discrimination against people who are- or who are perceived to be gay, lesbian, or bisexual.) While gender identity is not specifically recognized as a protected class, New Hampshire has recognized the right of transgendered people to pursue anti-discrimination claims under the state’s disability discrimination category.

Vermont includes sexual orientation in its definition of protected class, but also specifically includes gender identity and “ancestry.” Vermont also prohibits employment practices which discriminate against someone solely on the basis of having had a positive HIV-related blood  test. (It is illegal in Vermont to make the taking of an HIV-related blood a condition of employment.)

In Vermont drug addiction and alcoholism are considered physical or mental impairments protected by its anti-discrimination law. (No protection is afforded if current drug or alcohol use prevents the employee from performing their job duties or if their employment would threaten the safety or property of others.) Federal law protects people who suffer from alcoholism but not people who use illegal drugs. New Hampshire’s law mirrors the federal policy.

In both states the laws encompass the federal law protections by reference, but also provide for independent legal claims.  An employee can file suit under both state and federal law, lose the federal law case but still prevail on claims based on the state law.  (The general rule is that federal law provides a minimum basis of Constitutional protections; states are free to provide protection above and beyond the federal law.)

What can employers do?

It would be impossible for an employer to completely eliminate the potential for claims of discrimination. And not every complaint of discrimination made by an employee rises to the level of unlawful discrimination. But litigating such claims comes with the risk inherent in asking a judge or jury to decide, as well as the cost in money, time and resources. Taking steps to minimize the potential for employment discrimination makes financial sense.

  • Work with a legal or human resource professional to develop a discrimination policies and procedures manual for all employees. Keep the manual up to date;
  • Review the manual with management staff and have them sign off on having taking training and understanding their responsibilities. Hold management accountable for what goes between employees on in the work place;
  • Require employees to review the manual, and consider requiring periodic training on discrimination issues;
  • Provide employees a method for bringing complaints forward and encourage them to bring complaints forward sooner rather than later;
  • Hire a human resources professional who is trained in, experienced with and sensitive t o discrimination issues;
  • Act quickly but thoughtfully when discrimination complaints are brought forward. Involve the employee, the employees manager and the human resources professional. Take disciplinary action that is appropriate to the situation and document the steps taken. Doing nothing in the hope that “things will blow over” is usually the worst thing an employer can do in response to complaints of discrimination.

What can employees do?

Employees who believe they have been the victim of discrimination, harassment or retaliation in employment have several options:

  • Bring your concerns to your manager or department head. Follow your company’s internal complaint process. If this fails to resolve the matter in a satisfactory way, consider seeking assistance from an attorney;
  • Private sector employment discrimination complaints are handled by the Civil Rights Unit of each State’s attorney general office. State employee discrimination complaints are handled by the state’s Human Right’s Commission;
  • Discrimination complaints brought under federal law can be filed with the U.S. Equal Employment Opportunity Commission.








Return to Annual Homestead Declarations

Return to Annual Homestead Declarations

Vermont funds its educational system through a property tax system. The “education tax” is imposed on all homestead and nonresidential property, but at differing rates. The basis for classifying a particular property a homestead (and thus being taxed at a lower rate) is dependent upon the owner filing a “homestead declaration” with the Vermont Department of Taxes.

Effective January 1, 2013, property owners in Vermont will again have to file an annual homestead declaration in order to have their property classified as a homestead for purposes of the statewide education tax.  This is actually a return to the system that existed up until 2010, when the Department of Taxes stopped requiring an annual declaration. A homestead declaration filed in 2010 remained valid until the property was sold, the property was no longer the owner’s primary residence or the owner was no longer domiciled in Vermont. When this happened the property owner was expected to file a homestead declaration withdrawal with the Department of Taxes.

The goal was to relieve property owners from having to remember to file the declaration each year. As it turns out, however, property owners are regularly forgetting to file the withdrawal which has apparently caused all kinds of record keeping problems for the Department of Taxes.  In response, the Department has decided that a return to an annual filing requirement is in order.

A “homestead” property is statutorily defined as the principal dwelling and parcel of land surrounding the dwelling, owned and occupied by a resident individual as the individual’s domicile. An individual can only have one “homestead”; second homes and camps are generally not considered homesteads. (Camps can qualify only if it is the  owner’s principal residence.)  Although Vermont law does not require a particular number of days that an individual must occupy the dwelling to qualify as homestead, mere ownership and spending a lot of time at the property is not enough to qualify for homestead status.  The individual must be domiciled in Vermont and the house must be occupied as the individual’s principal dwelling. Spouses and civil union partners who own and occupy a residence together need to file only one homestead declaration.

The necessary form, and more information about homestead declarations, can be found at: www.state.vt.us/tax








Understanding The Visa and MasterCard Class Action Settlement Notice

 In the past few weeks merchants have been receiving a “Notice of Class Action Settlement” related to a lawsuit against Visa, MasterCard and numerous banks.  The purpose of the Notice is to provide information about the law suit and the proposed settlement to members of the “class.” The Notice encompasses 27 pages and can be overwhelming to the non-lawyer reader. Because it outlines a) how members of the class may be entitled to cash payments from Visa and MasterCard and b) certain rule changes concerning surcharges for accepting these cards, the Notice should not be simply tossed in the trash.

The Lawsuit

The case, titled In Re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation has on going in the U.S. District Court, Eastern District of New York, for the past seven years. Plaintiffs brought the case on behalf of merchants who accept Visa and MasterCard and include Payless Shoes, Parkway Corp. and Leon’s Transmission Service, Inc.  They claimed that MasterCard, Visa and approximately 40 member banks violated federal antitrust laws by conspiring together  set interchange fees (fees typically paid by merchants for accepting Visa and MasterCards) and imposed and enforced rules that limited merchants’ ability to steer customers into other payment methods. It is the Plaintiffs’ argument that such conduct forced merchants to pay excessive fees for accepting MasterCard and Visa cards.

The Class

Class action lawsuits are used when a large number of plaintiffs have claims or when claims are being made against a large number of defendants. Usually the plaintiffs or defendants are located in multiple states. The plaintiffs bring suit on behalf of a proposed class of plaintiffs. For the case to move forward as a class action the court must agree that the members of the proposed class have suffered a common injury or injuries, typically resulting from an action on the part of a business or a particular product defect or policy that applied to all proposed class members in a typical manner. The court must also be convinced that the initial plaintiffs have t he capacity and resources necessary to represent the class as a whole. If the court agrees, the class is certified and the initial plaintiffs are authorized by the court to act on behalf of all members of the class.

The initial plaintiffs are required, however, to provide all prospective members of the class  notice of their individual rights throughout the case. One particularly important right afforded prospective class members is the right to “opt out” of the class action and bring their own lawsuits against the same defendants. Typically, if a prospective class member does not affirmatively opt out of the class they will be bound by the results of the class action lawsuit. If someone does opt out, however, they will be bound by the results of their independent lawsuit. You cannot opt out of a class action and then opt back in if your individual case is not successful.

You received the Notice because…?

The parties have, after seven years of extensive litigation (more than 50 million pages of documents were reviewed and over 400 witnesses were deposed) decided that a settlement is in the best interests of both the class and the defendants.  A settlement does not mean that Visa and MasterCard admit any wrong doing. Settling the case means the defendants avoid the risk of a judgment that they must pay more than the settled amount; plaintiffs avoid the risk of a judgment for less money.  The settlement has not yet been approved by the court. Before that court will decide whether to accept the settlement the members of the class must be notified of their rights under the proposed settlement and given the option to opt out.

The records of Visa, Mastercard and the bank defendants show that you are probably a person, business or other entity that accepted Visa-Branded cards and/or MasterCard branded cards in the United States anytime from January 1, 2004 through November 28, 2012.  This makes you a member of the class, if you decide not to opt out.

What are the benefits to the class from the settlement?

The settlement provides two categories of benefits to class members: 1) a cash settlement and 2) changes in the rules and practices Visa and MasterCard can impose and enforce on class members who continue to accept Visa and/or MasterCard.

The cash benefit portion of the proposed settlement requires Visa, MasterCard and defendant banks to establish two funds from which class members may be paid. Combined, the two funds total just over seven billion dollars.  These funds will be used to pay money awards directly to class members, pay for the cost of administering the settlement (if approved by the court) and to cover attorney’s fees and expenses.  A portion of the funds (approximately $1.5 billion dollars) will be held back to cover claims of merchants who chose to opt out of the settlement and proceed in court with individual claims.

The expectation is that merchants will receive an amount equal to actual or estimated interchange fees paid on Visa and MasterCard transactions for the period of January 1, 2004 through November 28, 2012. The interchange fund provides payment (equal to 1/10 of 1% of credit card transaction volume) to merchants who accept Visa and MasterCard during an eight month period starting June 29, 2013.

The actual amount received, however, will be affected by the total value of all valid claims filed, costs of administration and attorney’s fees and expenses approved by the court. Details of how claims will be calculated are expected to be available as of April 11, 2013.

The rule changes, if approved by the Court, will become effective no later than January 27, 2013. Under the new rules, merchants will be able to charge an extra fee to customers who use Visa or MasterCard branded credit cards, may offer discounts at the point of sale to customers who do not pay with MasterCard or Visa. Merchants who operate under different trade names at more than one location will no longer be required to accept MasterCard and Visa at all of those locations. (If operating under one trade name the rule will still be that Visa and MasterCard must be accepted at all locations or none.) Merchants will still be allowed to set a $10 minimum purchase for Visa and MasterCard.

How Do you make a claim?

The Court first has to approve the proposed settlement. If approved, you will eventually have to file a valid claim in order to get payment from the settlement. If you have not opted out of the settlement the claim form will be mailed to you. It will also be available at www.PaymentCardSettlment.com.   Class members with more than one location or franchise may fill out (but are not required to) a pre-registration form which is available at the website.

A “Fairness Hearing” at which the Court will hear arguments as to why the proposed settlement is or is not fair is scheduled for September 12, 2013. How long it will take the Court to decide whether or not to accept the proposed settlement is unknown. The result is that it will be several months before a claim form will be available. In the meantime it is advisable for merchants to pull together information that supports the amount of their claim.

What if I don’t like the proposed settlement?

You have two options: 1) you can object to the settlement and 2) you can opt out.

To object to the settlement you must file a Statement of Objections with the U.S. District Court for the Eastern District of New York. A copy of your statement must also be sent to counsel for both the plaintiffs and the defendants. Your statement must ne postmarked no later than May 28, 2013.  Refer to pages 12 and 13 of the Notice for additional information.

How do you opt out?

You can only opt out of the cash settlement class. The proposed rule changes, if accepted by the court, cannot be opted out of and will apply to all merchants accepting MasterCard and Visa branded cards.

To opt out you must send a letter to the address specified in the Notice. First class mail is acceptable; you cannot opt out by phone, fax, email or online. You should keep a copy of your letter for your records. The letter must provide identifying information about the merchant (including the merchant’s taxpayer i.d. number), specifically state that you wish to opt out of the “cash settlement class in the case called In Re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation.”  Refer to the Notice (pages 11 and 12 for the information that must be included in your opt out letter.)

Your letter must be postmarked no later than May 28, 2013.  If your letter is postmarked after that date it will be considered invalid. You will be bound by the terms of the settlement but you will also remain a member of the Cash Settlement Class entitled to payment. If you file your opt out letter on time you will not be eligible for payment under the terms of the class. You then have the right to bring claims against the Defendants on an individual basis.

What if you do nothing?

If you don’t file a claim form, object to the settlement or opt out you will not receive payment. You will be bound, however, by the terms of the cash settlement. All merchants, whether they file a claim, object or opt out will be bound by the proposed rule changes, assuming the court approves the settlement.

Where can I get more information?

Contact information, copies of the proposed settlement and a list of important dates can be found at www.PaymentCardSettlement.com








New disclosure requirements for sales of residential property

Effective January 1, 2013, the sellers of real property that is not served by a public water system will have to provide the buyer with certain information about the potential health effects of consuming contaminated groundwater and the availability of test kits from the Vermont Department of Health.

According to the U.S. Environmental Protection Agency and the Vermont Department of Health, nearly 40% of Vermont residents obtain their drinking water from groundwater sources. News stories of families harmed by contaminated by contaminated ground water sources are becoming more frequent, and in many cases the link between the health issue and groundwater is not made until years after the damage has been done. Legislation initially considered would have required property owners to test water wells for a variety of contaminants.  The proposal was met with stiff opposition, and the newly enacted law is seen as an acceptable compromise in addressing a significant health concern. Sellers do not have to test their water source, but they do have to notify buyers of potential risks.

Vermont law already requires the sellers of pre-1978 homes provide buyers with information about the hazards of lead paint.  Sellers are now required to also provide buyers with similar information about the potential risks of contaminated groundwater water within 72 hours of the “execution of a contract for conveyance of real property (more commonly referred to as a “purchase and sales agreement.”)  The informational materials are being developed by the Department of Health and should be available on line prior to 2013.

Sellers who work with a realtor or broker should find it easy to comply with the new law.  The statute requires the department of health to worker with brokers to develop language to be added to the “seller’s property information report (“PIR”).  The PIR is a written report developed and voluntarily used by the real estate industry to disclose to buyers important information about the property.  Providing the information at the beginning of the sale minimizes the risk that a buyer will later claim that the seller failed to disclose information which may have caused the buyer to reconsider the purchase. While some may see the new law as more burdensome paperwork it can actually protect the seller down the road.

The new law is not limited in applicability, however, to only those deals involving a real estate professional.  Nor does the requirement appear to apply only to residential property.  The statute merely requires that any “seller” of real property provide the required information to buyers which would include “for sale by owner” transactions and sellers of commercial properties as well.

But while the seller’s failure to provide the required information will not affect the marketability of the property’s title, a civil penalty of up to $250 can be incurred.








Return to Annual Homestead Declarations

Vermont funds its educational system through a property tax system. The “education tax” is imposed on all homestead and nonresidential property, but at differing rates. The basis for classifying a particular property a homestead (and thus being taxed at a lower rate) is dependent upon the owner filing a “homestead declaration” with the Vermont Department of Taxes.

Effective January 1, 2013, property owners in Vermont will again have to file an annual homestead declaration in order to have their property classified as a homestead for purposes of the statewide education tax. This is actually a return to the system that existed up until 2010, when the Department of Taxes stopped requiring an annual declaration. A homestead declaration filed in 2010 remained valid until the property was sold, the property was no longer the owner’s primary residence or the owner was no longer domiciled in Vermont. When this happened the property owner was expected to file a homestead declaration withdrawal with the Department of Taxes.

The goal was to relieve property owners from having to remember to file the declaration each year. As it turns out, however, property owners are regularly forgetting to file the withdrawal which has apparently caused all kinds of record keeping problems for the Department of Taxes. In response, the Department has decided that a return to an annual filing requirement is in order.

A “homestead” property is statutorily defined as the principal dwelling and parcel of land surrounding the dwelling, owned and occupied by a resident individual as the individual’s domicile. An individual can only have one “homestead”; second homes and camps are generally not considered homesteads. (Camps can qualify only if it is the owner’s principal residence.) Although Vermont law does not require a particular number of days that an individual must occupy the dwelling to qualify as homestead, mere ownership and spending a lot of time at the property is not enough to qualify for homestead status. The individual must be domiciled in Vermont and the house must be occupied as the individual’s principal dwelling. Spouses and civil union partners who own and occupy a residence together need to file only one homestead declaration.

The necessary form, and more information about homestead declarations, can be found at: www.state.vt.us/tax








Social Host Liability

“‘Tis the season” and over the next few weeks people will be gathering at office parties and to celebrate the season’s various holidays. Frequently those celebrations may include lifting a cup of holiday cheer…or two.  If  you are hosting a holiday party where alcohol is available you should keep in mind the potential liability you, as the social host, might have for party goers who have one too many celebratory drinks.  In Vermont “social host liability” can be imposed in two ways: 1) through Vermont’s “Dram Shop Act” and 2) through the common law by claims of “negligence” on the part of the host.   “Social host” liability for intoxicated party guests is limited but it’s worth understanding.

The Dram Shop Act is a statute prohibiting the sale or furnishing of intoxicating liquors to minors, to persons apparently under the influence of intoxicating liquor, to a person after legal serving hours or to a person who :it would be reasonable to expect would be under the influence as a result of the amount of liquor already served or to that person.   Typically, the Dram Shop Act is applied to bars and restaurants that are caught either over serving patrons or serving alcohol to those under the age of 21.  But the statute provides a civil cause of action to persons who are injured as a consequence of someone else being intoxicated against the person who “have caused in whole or part such intoxication by selling or furnishing intoxicating liquor.”  The statute specifically excludes social hosts so long as they are not furnishing liquor for compensation or profit.  But (and this is a very important “but” to consider)  the Dram Shop Act does impose liability on a social host who “knowingly furnishes intoxicating liquor to a minor if the host knew, or should have known under the circumstances, that the person receiving the liquor was a minor.” The liability of a social host is not limited to just personal injuries caused by an intoxicated teen.  Under the Dram Shop Act social host liability extends also to property damage and injury to someone’s “means of support.”

“Furnishing” under the Dram Shop Act (and under the common law) requires that the host had actual possession or control or otherwise took some affirmative act- such as purchasing- in providing the liquor to the guest. In an unreported case the Vermont Supreme Court affirmed the dismissal of a case in which the guest brought his own beer to a party, got drunk, and later caused a car accident that resulted in serious injuries to his passenger. Because the host had not supplied the beer to the guest it could not be said that the host had the “control” necessary to hold the host liable for the injuries caused by the guest’s intoxication.

Because the liability of social hosts is significantly limited under the Dram Shop Act, persons injured by others who are intoxicated will frequently bring a claim against the social host under the common law theory of “negligence.” To prove a negligence claim of any sort, there must first be a legally recognized duty  of the defendant to conform to a certain standard of conduct so as to protect the plaintiff from an unreasonable risk of harm.  A defendant  who fails to live up to that duty is said to be “negligent.”

In 1986 the Vermont Supreme Court ruled that social hosts do not owe a “duty” toward intoxicated adults.  In the case of Langle v. Kurkul the plaintiff was a social guest who became inebriated at a party, left the party and went to someone else’s house where he climbed a swimming pool railing with the intent of diving into the pool.  The railing broke, he fell headfirst into the pool, broke his neck and became a quadriplegic.  The guest then sued the host of the party claiming that the host was negligent in allowing a party guest to become intoxicated. The Superior Court granted the hosts motion to dismiss which asserted that the guest had failed to state a legal cause of action against the host, and the guest appealed.

The Supreme Court reasoned that while drunkenness, in itself, is a social problem, there was no compelling social policy reason that justified imposing responsibility on a social host for injuries the drunk caused to himself. However, the Court -looking to other jurisdictions- found that the common law did indeed recognize a duty of social hosts to third parties, but in limited circumstances.  Where it was (or should have been) foreseeable that an intoxicated guest would drive an automobile when leaving the party the social host could be held liable for injuries the drunk caused to others.  (While this issue was not integral to the case actually being decided, subsequent cases confirmed that in Vermont a social host can be held liable under such circumstances.) The “take away” is that social hosts need to make sure that drunk drivers are not leaving their party. If a drunk driver leaves your party and winds up harming someone else, you can be responsible.  This is true even if the drunk goes to another party before getting into an accident- you will be in the chain of people who are sued.  The question will come down to whether you knew, or should have known in light of the circumstances, that the individual was intoxicated when they drove off.

In the same case the Vermont Supreme Court recognized a common law duty of social hosts to third parties for harm caused by underage drinkers where the host either furnished the alcohol or had reason to know that underage drinking was going on. Allowing underage drinking to take place at your holiday festivities is illegal and can in serious fines and even jail time. It can also result in your being sued for harm caused by an intoxicated teenager even if that teenager wasn’t driving when he/she harmed a third party.  Although there are no such recorded cases in Vermont, there are cases in other jurisdictions where social hosts are found liable for intoxicated teenagers who leave the premises, get into a fight and hurt someone else. (And as noted earlier, a social host can be liable under the Dram Shop Act when the harm caused is damage to property.)

The duty of social hosts  generally doesn’t extend to the homeowner whose house is used for an underage party while the homeowner is away. In cases involving underage drinking out of sight of adults the courts will look to what the owner of the property could have reasonably foreseen. Where the party takes place with the property owner having no knowledge of the party and/or underage drinking, liability will not be imposed. In the case of Knight v. Rower the Vermont Supreme Court rejected the imposition of liability for injuries resulting from underage drinking on the individuals who owned the property where the drinking took place.  The owners of the property (a camp) were not present at the party, had no knowledge that a party was taking place on that particular date, and in no way “furnished” or otherwise controlled the alcohol the teens drank.  At best the property owners were aware that underage drinking had occurred at the property occasionally in the past.  This was not enough to establish that the owners had been negligent on the date in question.

At the other end of the spectrum, however, is the situation where the parent buys a keg of beer for the party and then leaves for the weekend.  Imposition of liability is much more certain in this case.  Falling in between are those cases where the owner perhaps had allowed underage drinking at the home while the owner was there, or where the owner knew that the property- used for underage drinking in the past- was going to be the sight of another party on a particular date.  Each of these factors suggest that it was reasonably foreseeable to the owner that underage drinking was likely to take place on the property.  If the owner knew the teens were regularly raiding the liquor cabinet, but did nothing to stop it, liability will likely be imposed on the owner even if the owner wasn’t home when the party took place.

The holidays should be a time of relaxing with friends and family. But enabling or otherwise allowing underage drinking is clearly a risky business that should be avoided at all costs (during the holidays and at any other time of year.)  Likewise, drunk driving is an activity that should be avoided and, where possible prevented.  A little common sense- and an understanding of your legal obligations as the party host- will keep the happy in your Happy Holidays!








Vermont’s Lemon Law

Purchasing a motor vehicle is one of the largest and most important purchases consumers make. Most of us, however, have only a basic understanding of how a car operates or how to keep it in good working condition.  When we purchase a vehicle (particularly a used vehicle) or bring it in for repair we find it necessary to put our trust in someone else. Trust that the car we are buying wasn’t damaged in a previous accident, has an accurate odometer reading, and trust that is in good operating condition.  Trust that the repairs made were necessary in the first place, and that the repair will actually fix the problem.

There are some basic steps consumers can take to protect themselves when it comes to purchasing a vehicle; Read and understand the financing contract before signing it; read and understand any applicable warranty; know the seller and their reputation; take the vehicle to a mechanic of your own choosing for an inspection; thoroughly investigate the vehicle history.  In Vermont there is no time period for returning a vehicle if you change your mind after you signed the purchase contract.

When it comes to car repairs, a consumer can also take a few proactive steps to protect themselves: know the mechanic and, perhaps most importantly, get the repair estimate in writing.  There is no law in Vermont that requires a mechanic to stick to a quoted price if it’s not set out in a signed contract. If you are authorizing the garage to only make specific repairs, put it in writing. Ask about parts (will they be new or used) and labor costs- and have it put in writing.

Taking these few simple steps can often prevent problems down the road.  But there may come a time when you are convinced that either a) the car you just purchased is a “lemon” or b) the mechanic is charging you for repairs that aren’t fixing the problem or don’t seem related to the problem in the first place.   In such cases understanding your rights under Vermont’s “Lemon Laws” can help you save time and money.

“The New Motor Vehicle Arbitration Act”- aka Vermont’s “Lemon Law”

It’s important to know that the only “lemon law” on Vermont’s books applies to “new motor vehicles” which are defined as “a passenger motor vehicle which has been sold to a new motor vehicle dealer or motor vehicle lessor by a manufacturer and which has not been used for other than demonstration purposes and on which the original title has not been issued from the new motor vehicle dealer other than to a motor vehicle lessor.” The law generally does not cover consumers who purchase a used vehicle, whether from a licensed dealer or in a private transaction. (Alternative options available to buyers of used cars are discussed below.) Also excluded from the “lemon law” are tractors, motorized highway building equipment, road-making appliances, snowmobiles, motorcycles, mopeds, or the living portion of recreation vehicles, or trucks with a gross vehicle weight over 10,000 pounds.

Vermont’s lemon law requires that all new vehicles sold or leased in the state conform to applicable warranties. The obligation to make sure that the vehicle conforms to warranties rests on the manufacturer, not the dealer. If the consumer notifies the manufacturer or its agent (the dealership) of a nonconformity that substantially impairs the use, market value or safety of the vehicle then the manufacturer is legally obligated to make whatever repairs are necessary. (The manufacturer can delegate responsibility for the actual repairs to the dealer, but ultimately it is the manufacturer who pays for the cost of repairs.) The law further requires the manufacturer to give the consumer a written a) repair order b) summary of the consumer’s complaint and c) an itemized statement of all work done to repair the vehicle.

In many cases the first attempt to repair the vehicle will correct the defect.  But what happens when multiple repairs are attempted and the defect is still not fixed? That’s where the “arbitration” part of Vermont’s “New Motor Vehicle Arbitration” law comes into play. If, after three attempts to repair the vehicle the problem is still not fixed or the vehicle (after one or more repair attempts) is out of service for 30 or more calendar days, then the consumer has the right to choose between a) the dispute mechanism set out in the manufacturer’s warranty (typically arbitration or mediation before a third party neutral chosen by the manufacturer) or b) the Vermont Motor Vehicle Arbitration Board.  The manufacturer has the responsibility of notifying the consumer of the right to choose, and to provide the forms necessary to start the process. There is no fee required for either dispute mechanism. The choice must be carefully made- choosing one form of resolving the matter precludes resorting to the other option later on.

In either case the arbitration/mediation must take place within 45 days of the manufacturer or VT Arbitration Board receiving notice of the consumer’s request for dispute resolution. During the 45 day period the manufacturer has the legal right to make a final attempt at repairing the vehicle attempt.  If the repair is successful to the consumer’s satisfaction, the arbitration process is terminated “without prejudice”- the consumer can restart the arbitration process if the repair fails during the remaining life of the warranty.

It is important to keep in mind that you cannot stop making lease or financing payments because of the defect and unsuccessful attempts to repair it.  In fact the law specifically bars a person who has stopped making payments on the vehicle from the remedy available under the statute.  Stopping payment could feel like the right thing to do, but in the end it will undermine your legal protections.

The VT Arbitration Board consists of five members and two alternates. By law one member of the board must be a new car dealer in Vermont, one member (and one alternate) must be “knowledgeable in automobile mechanics” and the remaining three must be persons “having no direct involvement in the design, manufacture, distribution, sales or service of motor vehicles or their parts.” The Board conducts a hearing by taking testimony from both sides, along with any relevant documents and testimony from witnesses.  The issue for the board to decide is whether the defect substantially impairs the use, market value or safety of the vehicle even after repairs are made by the manufacturer.  The board must issue its decision within 30 days of the hearing.  The board’s decision can be appealed to the Superior Court, but only for very narrowly defined reasons (including corruption/impartiality/misconduct by the board). Otherwise the decision of the board is binding on all parties involved, and a manufacturer’s failure to comply with a decision constitutes an unfair or deceptive act in violation of Vermont’s Consumer Protection law (which potentially increases penalties against the manufacturer.)

Two forms of relief are available to the consumer who prevails before the board.  The consumer has a right to choose to either a) receive a replacement vehicle of a similar make, model and option accessory package or b) return the vehicle to the manufacturer for a refund of the full purchase price.  A reasonable allowance for the consumer’s use of the vehicle prior to the first repair attempt can be deducted from the refund. (The statute sets out a formula for determining a “reasonable allowance.”) In the case of a leased vehicle, the manufacturer could be required to either replace the leased vehicle or refund all lease payments made minus a reasonable use allowance. The manufacturer is allowed to put the vehicle back on the market for sale, but must affix to a window a conspicuous notice that the vehicle was previously adjudicated as having a serious defect. Notice that the vehicle was adjudicated as having a serious defect must also appear on the vehicle’s title.

In the next article we’ll discuss a consumer’s rights when the car in question is a “used vehicle.”








Vermont’s newest business entity: The “B Corporation”

Effective July 1, 2011, entrepreneurs in Vermont have a new business entity to consider when determining how to set up shop.  The “Vermont Benefit Corporation Act” creates a new corporate model that encourages “for profit” businesses to focus on solving social and environmental problems.
Ordinary corporations have a legal duty to protect their shareholder’s interests above all else. Indeed, corporate law in every state creates a legal cause of action against directors and corporate officers who breach their duty to the shareholders. This duty (often interpreted as a duty to maximize profit) typically results in a narrow focusing of the business mission and operating methods.  Corporate directors and officers are encouraged to minimize or otherwise overlook the potential social and/or environmental impacts of a particular decision if they adversely affect the bottom line.
At the same time, many corporations recognize that being known as a “green” company greatly increases their market potential. (For purposes of this article I am using the term “green” to include both environmental and social considerations.)  Unfortunately, holding a company out as “green” is frequently nothing more than good marketing.  Standards for operating as a “green” company vary from state to state, and from industry to industry.  In many cases there are no standards by which to measure a company’s social and/or environmental impact.  Individuals inclined to invest “green” companies have few tools available to help them determine just how green the company really is.
The Vermont Benefit Corporation Act seeks to address the barriers to corporate involvement in social and environmental issues in a couple of important ways. The first is that a Benefit Corporation’s (also known as a “B Corp.”) legal structure expands corporate accountability to include an obligation to consider social and environmental consequences in decision making.  While maximizing shareholder interests is still a part of the equation, B Corp. directors and officers are not required to make shareholder interest the only consideration. Under the law B Corporations are legally required to consider the broader impacts of a particular course of action.
The Vermont Benefit Corporation Act also addresses the issue of “transparency” in determining just how “green” a business is on a day to day basis.  Benefit Corporations legally obligate themselves to operate in accordance with independent, third party standards. The B Corp. is required to issue an annual “Benefit Report” which sets out (among other information) the corporations public benefit goals, steps taken during the year to meet those goals and an assessment of social and environmental performance that is prepared in accordance with the third party standards.   The law also requires transparency as to the annual compensation paid to each director. Shareholders then have the authority to approve or reject the Benefit Report.
Forming a “B Corporation”
Forming a Vermont Benefit Corporation is similar to forming a traditional Vermont Business (“for profit”) Corporation.  Articles of Incorporation are drafted and filed with the Secretary of State.  To qualify as a “B Corporation,” however, the Articles of Incorporation must specifically include the statement “This Corporation is a benefit corporation.” As with a traditional corporation, incorporators of a B Corporation must still decide whether the business will be a close or general corporation, and further decide the company’s tax status (“S corp.” vs. “C corp.”).   The Secretary of State must approve the corporate name.  A registered agent based in Vermont must be designated for the acceptance of service of legal documents on behalf of the corporation. A fiscal year and the number and class of shares must be designated.  A Board of Directors must be established.
Under the new law an operating Business Corporation can choose to become a Benefit Corporation by amending its Articles of Incorporation to add the statement “this corporation is a benefit corporation.”  A current Business Corporation can also merge with a Benefits Corporation and the “surviving” corporation designated as a Benefits Corporation.  In both cases the law requires certain procedures be used to provide notice to the shareholders.
Corporate Purpose- General and Specific Public Benefit
One of the most obvious distinctions between a Business Corporation and a Benefit Corporation is the statement of “corporate purpose.” Under Vermont law, a Business Corporation is free to engage in any lawful business unless the Articles of Incorporation specifically limits permissible business activity. Benefit Corporations are also permitted to engage in any lawful business activity.  Under the new law, however, B Corporations “shall have the purpose of creating a general public benefit.” This benefit is in addition to- and may be a limitation on- other purposes of the corporation.
A “general public benefit” is statutorily defined as “a material positive impact on society and the environment, as measured by a third-party standard, through activities that promote some combination of specific public benefits.”  In other words, the stated purpose of a B Corp. is to engage in certain activities with the goal of promoting a larger social or environmental goal.
“Specific public benefit” is defined to include providing low income or underserved individuals or communities with beneficial products or services; promoting individual or community economic opportunities beyond the creation of jobs in the normal course of business; preserving or improving the environment; improving human health; promoting the arts ort sciences or the advancement of knowledge; increasing capital flow to other public benefit entities; and the accomplishment of any other identifiable benefit for society or the environment.
Perhaps the most important distinction between a Business Corporation (traditional corporations) and a Benefit Corporation is the fact that the creation of a general and specific public benefit is deemed, by law, to be “in the best interests of the benefit corporation.” As mentioned earlier, the overriding purpose of a traditional corporation is to protect and maximize the shareholder’s interests and directors and officers of Business Corporations have a fiduciary duty to make such considerations the highest priority when engaged in corporate activities. Decisions that do not maximize shareholder interests may result in directors and officers being liable for damages caused by breach of that duty, and as a result a narrow focusing of the business mission and operating methods usually occurs.
By identifying a general and specific benefit as “in the best interests of the corporation” the directors and officers are required to consider more than just shareholder benefit when exercising business decisions. Indeed, the new law requires that directors consider the impact of any board decision not just on shareholders, but also potential impacts on the employees and workforce of the benefit corporation, its subsidiaries and its suppliers, the interests of customers to the extent they are beneficiaries of the general and specific public benefit, the community as a whole, the local and global environment, and long and short term interests of the B Corp. itself  Directors may also consider “any other pertinent factors or the interests of any other group that the director determines are appropriate to consider.” A director is not required to give any one particular interest a priority.  Rather, the law recognizes that to be a truly “green” corporation factors other than shareholder interests must be considered when business decisions must be made.
Corporate “Benefit Director” and “Benefit Officer”
The new Vermont Benefit Corporation law also creates a new corporate directorship and officer.  Each board of directors is required to designate at least one person to be the “benefit director.” In addition to traditional responsibilities, the benefit director is responsible for preparing the “annual benefit report.”  The “benefit officer” is the individual given the authority and responsibility of performing management duties related “to the purpose of the corporation to create public benefit.”
“Annual Benefit Report”
Corporations typically prepare an annual report for shareholders.  The new law requires that the annual corporate report for a B Corp. contain specific information.  The annual report must include: a) a statement of the specific goals or outcomes identified by the corporation for creating general public benefit and specific public benefit during the reporting period; b) a description of the actions taken by the B Corp. to attain the identified goals or outcomes and the extent to which they were accomplished; c) a description of barriers experienced by the B Corp in attaining its stated goals or outcomes; d) specific actions that can be taken to improve corporate performance in attaining identified general and specific public benefit; and e) an assessment of the B Corp.’s social and environmental performance prepared in accordance with third-party standards that has been applied consistently with prior benefit reports (this  requirement is discussed further below); and f) a statement of general and specific public benefit goals and outcomes, approved by the shareholders, for the next reporting period.
Also required in the benefit report is a statement from the benefit director whether, in the opinion of that director, the corporation acted in accordance with stated goals and outcomes in all material respects during the reporting period, and whether the corporate board and directors conformed with the duty of considering more than just shareholder interests when engaging in corporate business during the reporting period.  If the benefit director’s opinion is that the corporation did not act in accordance with stated general and specific public benefit goals/outcomes, or that the board or officers did not satisfy their duties, the benefit director shall include a description of the respective shortcomings.
In addition to information about corporate activity during the reporting period, the annual benefit report must also provide the name and contact information for each director, including benefit directors, the compensation paid by the corporation to each director during the reporting period.  The report must also identify each shareholder owning 5% or more of the shares of the benefit corporation.
In addition to providing each shareholder a copy of the annual benefit report, the law requires the B Corporation to post its most recent report on its website (although information about director compensation must be included in the annual report itself it can be excluded, along with any proprietary information, from the website posting) or otherwise make the report available, free of charge, to any person requesting a copy.
“Third-Party Standards”
Marketing a business as “green” is big business.  The problem for consumers and investors, however, is that there are few-if any- applicable standards by which to measure a company’s social and/or environmental impact. The standards that do exist may vary from region to region. Vermont’s Benefit Corporation Act seeks to address this concern by requiring Benefit Corporations to assess- and publish- its performance in attaining general and specific public benefit goals by using third party standards.  The statute defines such standards as “a recognized standard for defining, reporting and assessing corporate social and environmental performance.”
The third-party standard must be developed by a person independent of the corporation (no material relationship with the corporation or any of its subsidiaries) and “shall be transparent” by making available to the public the factors considered when measuring the performance of a business, the relative weight given to each factor and the identity of the person who developed and controls changes to the standards and the process by which those changes are made.
The development of “third-party standards” is itself a rapidly developing industry. The present leader in third-party validation is “B Lab,” a Philadelphia based alliance of B Corporations that have promulgated uniform standards in four general categories: governance (how the business is managed), community relations and impact, environmental impact and beneficial business models (how the business is structured.) B Lab provides a thorough assessment of a B Corporation’s operations and those that meet the rigorous standards are given a “B Corp. certification.”  (Vermont’s law does not require “certification,” but only that third- party standards be used to regularly assess the company’s performance. B Corporations are free to choose among available third-party standards, so long as the standards used meet the transparency requirements.)
 Right of Action
The new law provides that the duties of directors and officers and the general and specific public purpose of B. Corps. are enforceable only through a “benefit enforcement proceeding.” This newly created right of action can be commenced or maintained only by shareholders, a director of the corporation, a person or group of persons owning 10% or more of the equity interest in any entity of which the benefit corporation is a subsidiary or any such person as may be specified as having a right of action in the B Corp.’s Articles of Incorporation. The general public does not have a right of action against a benefit corporation that fails to live up to its mission.
Conclusion
According to the “Certified B Corporation” website there are presently 439 B Corporations in 11 states (plus the City of Philadelphia) across 54 industries generating 2.18 billon dollars in revenues. Given Vermont’s reputation of having a socially and environmentally consumer base, is reasonable to assume that we will see a blossoming of Vermont B Corporations over the next few years.
For more information on B Corporations, check out these links:








Opening a “food establishment” in Vermont

This is the first in a series of articles meant to explore some of the legal requirements for starting a food related business. These articles are meant to be introductory in nature.  The food service industry is extensively regulated at both the state and federal levels; more detailed consultation with an attorney before engaging in any business activity is strongly recommended.

Ever stood in your garden in the cool of a summer evening and thought to yourself “If only I had a dollar for every one of those zucchinis!”  New Englanders have a long tradition of producing their own food and turning their gardens into extra income.  In a down economy it comes as no surprise to find that this tradition has found recent momentum; today’s news frequently cites the resurgence of farmer’s markets, CSAs (“community supported agriculture”), farm to table/school programs and “locally produced food.” Growing your own food is a great way to stretch a household budget and controlling the quality of the food your family eats. For more and more people it’s also becoming a way to generate extra income.

But legally selling food you produce to the public is not quite as simple as planting seeds in the ground or baking up a batch of cookies. Both the state and federal governments have detailed requirements that must be met before your first sale can happen. The scope of regulation is directly related to the product you are selling.  Meat, dairy and seafood/fish products are extensively regulated.  Raw vegetables are generally at the other end of the spectrum and are not quite as heavily regulated- provided you are not selling across state lines. 

For purposes of this article we will focus primarily on regulations related to “prepared foods”- defined in Vermont as “food that is heated, cooled, altered in any way from its original state or mixed with other foods for human consumption.” This broad definition covers a wide range of food products that a home producer might wish to sell, from canned dilly beans and pickles to soups, stews and sandwiches to baked goods.  If your business plan is to sell a product within this definition there will be some level of regulation you need to become familiar with.

We will also narrow our focus by concentrating on those types of “food establishments” that home based businesses will most likely engage in: home/commercial catering, push carts and catering trucks, fair stands and farmer’s markets.  We will not focus on opening or operating a restaurant, inn or bed and breakfast.

Generally applicable regulations:

There are some state regulations that are generally applicable no matter what sort of food establishment you plan to operate:

Taxes

Regardless of which type of food establishment you are planning on operating you will probably have tax obligations.  Responsibility for the taxes on income will depend on the business entity you choose to operate under. Operating as a sole proprietor means the income from your business will be taxed as your personal income; operating as a corporation could mean (depending on the type of corporation setup) that business income is taxed as corporate and not personal income.

Regardless of the business entity, however, the State of Vermont imposes a “meals and rooms tax” on any person engaged in “charging for a taxable meal.” Prior to beginning business an operator of a food establishment must register and obtain a meals and rooms tax license.  It is unlawful to operate a food establishment without first having this license. The license is non-assignable and nontransferable and must be surrendered if the business is sold or transferred or if the person listed on the license ceases to do business. 

For purposes of the types of “food establishments” we are discussing, a “taxable meal” is any nonprepackaged food or beverage furnished within the state for a charge, regardless of whether the food is intended to be consumed on or off the premises.

There are exemptions to the tax. Foods such as raw vegetables, candy, flour, nuts, coffee beans, etc.  are not subject to the meals and rooms tax.  A sandwich made from raw vegetables, however, is subject to the tax as are any heated food or beverage whether or not they are “prepackaged.”  (So while the chili you plan to sell from a crockpot is not necessarily “prepackaged” it is still within the scope of the tax.)  Foods and beverages sold by nonprofits as a fund raiser are exempted, as are foods sold on the premises of a school. But as a general rule, anybody planning to sell a food product should expect to pay meals and rooms tax to the State.

Under the law, responsibility for payment of the tax rests on the operator of the business.  It is unlawful for the operator to “absorb” the tax or not add it to the item sale price. The operator is required to maintain records that show separately the charge for the item sold and the amount of tax paid. These records must be kept for three years and are open for inspection by the tax commissioner at any time. Returns showing the amount of gross sales and the amount of tax collected must be filed, along with the actual tax payment to the state either quarterly (if total annual sales are less than $500) or monthly.

Labeling and Packaging

Anybody selling a packaged product (including preserves, pickles, baked goods, etc.) must comply with Vermont’s “Packaging and Labeling Law” and regulations.  Some products such as meat, seafood, poultry and dairy must also meet federal label and packaging requirements.

Vermont’s law imposes three primary requirements:

1.      The label/package must clearly identify the product.  In some cases a generic name can be used (ie. Bob’s “beef stew”) but the label cannot be misleading or deceptive;

2.      Quantity- the label must specify accurately the weight/volume of the product in the package.  Quantity cannot be qualified or exaggerated as in “one JUMBO pound” or “one FULL gallon.” A pound is a pound and a gallon is a gallon.

3.      Declaration of Responsibility: this is the name and address of the person/company who manufactured the product.  If you are selling something that was manufactured by someone else, it must say so on the label.  State law mandates minimum letter and number size for this information.

 

Much has been made recently about nutritional labeling. This is a requirement imposed by federal law.  An exemption for small businesses is contained within the law, and most food producers in Vermont will qualify for this exemption.

Federal law also requires that any product containing two or more ingredients list those ingredients.  Small producers are not exempt from this requirement.  An accurate listing of ingredients is particularly important when your product contains an ingredient known to cause allergic reactions (milk, peanuts, shellfish, eggs, tree nuts, etc.)

“Organic” is a term found on many Vermont produced products and it is a term that more and more consumers are looking for.  Federal law allows for the use of the term organic provided the food and its primary ingredients, have been grown, produced and handled as required by the Act.  In Vermont the Northeast Organic Farming Association (“NOFA”) promulgates rules and oversees the use of the term “organic” on food labels and packages.  More information can be found at the NOFA website.

In the next article we will begin to consider the legal requirements for operating specific food establishments. 








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