Five Stories That Matter in Michigan This Week – May 10, 2024

  1. Fraser Trebilcock’s Growth Continues With Grand Rapids Office Relocation

Fraser Trebilcock Davis Dunlap & Cavanaugh, P.C., one of Michigan’s well established law firms with a history of providing excellent legal services, is pleased to announce it has relocated its Grand Rapids office. This move is a testament to the firm’s continued ability in taking a proactive approach in providing comprehensive legal solutions across a wide range of practice areas, helping clients capitalize on potential opportunities.

Why it Matters: In late April, Fraser Trebilcock’s Grand Rapids office moved to 300 Ottawa NW Suite 810, located within walking distance of all downtown restaurants, entertainment venues, museums, municipal buildings, and the Medical Mile. The office offers the full range of the firm’s legal services, including litigation, business, tax, real estate, trusts and estates, and other areas of specialty. Clients can expect the same level of professionalism and personalized attention that Fraser Trebilcock is known for. Read more.

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  1. DOL Finalizes Rule to Raise Overtime Salary Threshold

The Department of Labor (DOL) recently announced a final rule that will significantly increase the annual salary threshold required to classify employees as exempt under the Fair Labor Standards Act (FLSA). The rule will raise the minimum salary requirement in two stages, from the current level of $35,568 per year to $43,888 per year on July 1, 2024, and then to $58,656 per year on January 1, 2025, with recalculations every three years thereafter.

Why it Matters: The DOL estimates that the rule will impact approximately 1 million employees initially and another 3 million employees after the second salary increase. Employers must now decide whether to increase salaries to maintain exempt status for affected employees or reclassify them as non-exempt workers entitled to overtime pay, considering factors such as overtime hours worked, labor costs, and administrative burdens.

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  1. CRA Issues Bulletin Regarding THCA

The Cannabis Regulatory Agency recently issued a bulletin to answer questions regarding tetrahydrocannabinolic acid (“THCA”), its status, and how businesses in the state can obtain and possess THCA.

Why it Matters: THCA is a non-intoxicating cannabinoid that is converted into THC when it goes through the process of decarboxylation (increasing temperature between 200-290 degrees). Under the Michigan Regulation and Taxation of Marihuana Act, THCA is included in the definition of THC. Licensees can obtain and sell marijuana that contains THCA, and they are allowed to convert THCA into THC as long as they abide by state laws under the MRTMA.

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  1. June Business Education Series

Most entrepreneurs and business leaders face similar frustrations – employee conflicts, lack of sales, profit woes and inadequate growth. Decisions never seem to get made, or, once made, they fail to be properly implemented. There is a solution, and it is not complicated or theoretical.

Why it Matters: The Entrepreneurial Operating System (EOS) is a practical method for achieving the business success you have always envisioned. More than 100,000 companies have discovered what EOS can do. Learn more and to register.

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  1. Fraser Trebilcock Attorney Robert D. Burgee Recognized as a ‘Michigan Go To Lawyer’ for Business Transactions by Michigan Lawyers Weekly

Fraser Trebilcock attorney Robert D. Burgee has been recognized by Michigan Lawyers Weekly as a ‘Michigan Go To Lawyer’ in 2024 for business transactions. “I am honored to have been recognized by Michigan Lawyers Weekly as a ‘Michigan Go To Lawyer’ for business transactions,” said Bob.

Why it Matters: Mr. Burgee serves as Co-Chair of the firm’s Business & Tax Department and Chair of the firm’s Employee Benefits Department. He has over a decade of experience assisting business clients and entrepreneurs with startups, acquisitions, succession, and growth planning, as well as more general legal guidance, including navigating civil matters, regulatory compliance, employee benefits, and human relations. Read more.

Related Practice Groups and Professionals

Cannabis Law | Sean Gallagher
Labor, Employment & Civil Rights | David Houston
Business & Tax | Robert Burgee

The DOL Issues Final Rule Creating New Standard for Classifying Workers as Employees vs. Independent Contractors

On January 9, 2024, the United States Department of Labor (DOL) released its final rule on worker classification under the Fair Labor Standards Act (FLSA). This new rule, effective as of March 11, 2024, signals a return to a standard more likely to classify workers as employees than contractors. Thus, it is more likely that employers will be determined to have misclassified workers as contractors, resulting in liability.

The New Rule: A Deviation From Trump-Era Classification Standards

The final rule, which is consistent with the proposed rule released by the DOL in October 2022, differs significantly from the Trump Administration’s “core factors” test. The Trump-era rule emphasized two primary factors: the nature and degree of control over the work, and the worker’s opportunity for profit or loss. Three other factors—the skill required, the permanence of the relationship, and whether the work is part of an integrated unit of production—were deemed less significant.

The new rule requires a more detailed and comprehensive analysis by establishing the totality-of-the-circumstances economic reality test, a six-factor test giving equal weight to each factor in determining whether a worker is an employee or an independent contractor. The DOL claims that this approach is consistent with how federal courts have evaluated employee vs. independent contractor classification for decades.

The factors outlined in the final rule include:

    1. the worker’s opportunity to share profit or loss,
    2. the investments by the worker and potential employer respectively,
    3. the permanence of the work relationship,
    4. the worker’s or employer’s degree of control over the work,
    5. the integration of the work into the employer’s business, and
    6. the skill and initiative required of the worker.

The final rule also addresses how factors such as scheduling, remote work, and the ability to work for others should be considered under factor four—the control factor—and also provides additional context to other factors as well.

Why This Matters to Michigan Employers

All Michigan employers, as well as employers across the country, who are covered under the FLSA will be impacted by the final rule. Generally speaking, the FLSA applies to employers who have at least two employees and gross $500,000 or more a year. If a worker is classified as an employee as opposed to an independent contractor, then that worker is covered under the FLSA, which sets federal rules for minimum wages and overtime. When the FLSA applies, employers are also required to maintain certain records.An employer who violates the FLSA can be subject to lawsuits, be forced to pay back pay for unpaid overtime, and face fines, among other consequences.

It’s also important for Michigan employers to keep in mind that Michigan has its own standards for independent contractor classification, and the more stringent of the two standards is likely to apply. Currently there is legislation pending in the Michigan legislature that would tighten the definition of “independent contractor” considerably. Under the new bill, an independent contractor is “an individual who performs work” and to whom the following three conditions apply:

    • The individual is free from control and direction of the payer in connection with the performance of the work, both under a contract and in fact.
    • The individual performs work that is outside the usual course of the payer’s business.
    • The individual is engaged in an independently established trade, occupation, or business of the same work performed by the individual for the payer.

The bottom line is that, under federal and state laws, classifying a worker as an employee or independent contractor requires a complex analysis of various factors. And the risks and consequences of misclassifying can be severe.

Businesses and employers should remain diligent in analyzing their workers’ classifications and consult an experienced attorney with any questions. The attorneys at Fraser Trebilcock Davis & Dunlap, PC will continue to monitor these developments and stand ready to guide clients in their compliance with the new regulations set to take effect.

This alert serves as a general summary and does not constitute legal guidance. Please contact us with any specific questions.


Attorney David J. HoustonFraser Trebilcock Shareholder Dave Houston has over 40 years of experience representing employers in planning, counseling, and litigating virtually all employment claims and disputes including labor relations (NLRB and MERC), wage and overtime, and employment discrimination, and negotiation of union contracts. He has authored numerous publications regarding employment issues. You can reach him at 517.377.0855 or dhouston@fraserlawfirm.com.

Five Stories That Matter in Michigan This Week – January 12, 2024

  1. Cannabis Regulatory Agency Announces $1 Million Social Equity Grant Program

Michigan’s Cannabis Regulatory Agency (CRA) announced a $1 million grant program to applicants who have a recreational marijuana license, have eligible Social Equity Program participants, and participate in the CRA’s “Social Equity All-Star Program.”

Why it Matters: The program is intended to encourage participation in the industry by people from communities that have been disproportionately impacted by marijuana prohibition and enforcement.

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  1. Fraser Trebilcock Welcomes Danielle Lofton to the Firm

We are pleased to announce the hiring of attorney Danielle Lofton who will work primarily in the firm’s Lansing office, focusing her practice on insurance defense.

Why it Matters: Ms. Lofton represents clients with personal injury claims including no-fault cases for several years. She has routinely secured early dismissals through successful motions and negotiated favorable settlements for her clients. Learn more.

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  1. Department of Labor Issues New Rule on Independent Contractors

This week, the US Department of Labor issued a new rule modifying its analysis for determining whether a worker is an employee, or an independent contractor under the Fair Labor Standards Act. The final rule is effective on March 11, 2024.

Why it Matters: We previously reported on the Department of Labor publishing a Notice of Proposed Rulemaking regarding classification of employee or independent contractor under the FLSA. Under this final rule effective on March 11, 2024, it will provide clearer guidance for employers and how they determine their workers’ classifications, and further protect employees from misclassification.

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  1. Fraser Trebilcock Attorney Andrew J. Moore Elected to Board of Directors of Catholic Bar Association

We are pleased to announce that attorney ​Andrew J. Moore has been elected to the Board of Directors for the Catholic Bar Association, a national bar association with members in all 50 states. “I am honored to be elected to the Board of Directors, and I look forward to continuing the mission of the Catholic Bar Association,” said Andrew Moore.

Why it Matters: Andrew focuses his practice on general litigation matters, insurance defense, estate and trust administration, real estate transactions, family law, and criminal defense. His experience covers a range of practice areas, from out of court matters such as assisting clients in estate planning and business and tax matters to representing clients at trial in insurance, divorce, and criminal defense proceedings. He also serves on the Board of Directors of the Lansing Catholic Lawyers Guild. Read more.

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  1. Independent Citizens Redistricting Commission Required to Redraw Seven House Districts

A three-judge panel ordered this week that the Independent Citizens Redistricting Commission redraw seven state House districts by February 2nd, after it was ruled unconstitutional.

Why it Matters: Last year, a group of voters sued the Independent Citizens Redistricting Commission alleging that the Commission had violated the federal Voting Rights Act by drawing maps that impacted black voters’ opportunity to elect their preferred candidates.

Related Practice Groups and Professionals

Cannabis Law | Sean Gallagher
Insurance Law | Danielle Lofton
Labor, Employment & Civil Rights | David Houston
Litigation | Andrew Moore
Election Law

Five Stories that Matter in Michigan This Week – March 10, 2023

  1. US Supreme Court Makes Clear that Highly Compensated Employees can be Eligible for Overtime Pay

In Helix Energy Solutions Group v. Helix, the U.S. Supreme Court ruled that highly compensated employees—in this case the employee at issue earned more than $200,000 per year—can be eligible for overtime pay if they are paid on a daily basis as opposed to a salary basis.

Why it Matters: Many employers mistakenly assume that highly compensated employees are not eligible for overtime pay. However, under the Fair Labor Standards Act, employees are exempt from overtime if they earn at least $107,432 per year on a salary basis (and perform executive, administrative, professional or outside sales work. Because the penalties for noncompliance can be steep, employers should consult with legal counsel to help ensure that their workers are classified and paid in accordance with state and federal guidelines.

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  1. How Copyrights Protect Your Business

Copyright is the exclusive legal protection that covers an original work of authorship. Copyrights vest upon creation of the work, which means placing the work onto a tangible medium (e.g., applying paint to a canvas or words to a screenplay).

Why it Matters: As noted above, copyrights vest upon creation of the work, even if it isn’t published. Similar to trademark law, it can be difficult to enforce your copyright if the work is not registered with the U.S. Copyright Office. Learn more.

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  1. Department of Labor Issues Guidance to Employers on Telework

On February 9, 2023, the U.S. Department of Labor (DOL) issued a Field Assistance Bulletin (Bulletin) addressing several questions related to compliance with the Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA) when a business employs teleworkers.

Why it Matters: The Bulletin provides that the protections under the FLSA apply equally to employees who telework as to employees working at an office, factory, construction site, retail outlet, or any other worksite location. Learn more.

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  1. Business Education Series – Teaching Leadership

Hosted at the Lansing Regional Chamber, the March Business Education Series will have Brain Town, founder and CEO of Michigan Creative, who will discuss how to inspire your staff to be the leaders they all have inside of them.

Why it Matters: Brian will also show you how to write core values that can guide your business and help form an unstoppable team. Attendees will learn how to write and use core values, leadership tips, and ways to inspire greatness. Business owners and leaders are encouraged to attend! Learn more.

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  1. The Ins and Outs of Cottage Succession Planning in Michigan (Part Two)

A cottage plan is an agreement that describes how a cottage will be shared, managed and passed on to future generations of family members. Cottage plans typically cover a range of issues that can impede the succession of a cottage if left unaddressed.

Why it Matters: There are significant advantages to having a cottage plan that utilizes an LLC or trust structure. There is no single option that is best for all families, so it’s important to consult with an experienced cottage law attorney to determine what option is right for you. Learn more from your Fraser Trebilcock attorney.

Related Practice Groups and Professionals

Labor, Employment & Civil Rights | Aaron Davis

Intellectual Property | Jared Roberts

Cottage Law | Mark Kellogg

Five Stories that Matter in Michigan This Week – March 3, 2023

  1. DOL Issues Telework Guidance to Employers

On February 9, 2023, the U.S. Department of Labor (DOL) issued a Field Assistance Bulletin (Bulletin) addressing several questions related to compliance with the Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA) when a business employs teleworkers.

Why it Matters: The Bulletin provides that the protections under the FLSA apply equally to employees who telework as to employees working at an office, factory, construction site, retail outlet, or any other worksite location. Learn more.

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  1. How Trademarks Protect Your Business

Trademarks operate to distinguish your business, build consumer goodwill and solidify your reputation as a source for the goods or services. In most cases, a trademark is a distinctive word, phrase, logo or design that is associated with or applied to a category of goods or services.

Why it Matters: If you are in the business of providing goods or services, then it is strongly recommended that you consult with an intellectual property lawyer to get the best protection in a timely manner. Learn more.

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  1. $35 Million in Grants Available for Small Nonprofits

The State of Michigan, Department of Labor and Economic Opportunity (LEO) and Michigan Nonprofit Association (MNA) have teamed up to help Michigan charities whose operations were impacted by the COVID-19 pandemic.

Why it Matters: Under this initiative, called the MI Nonprofit Relief Fund, grants in amounts between $5,000 and $25,000 will be awarded to selected entities with annual revenues total under $1 million. In addition, eligible entities must be based in Michigan and recognized by the IRS under Section 501(c)(3). Learn more.

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  1. Michigan Cannabis Sales Over $200 Million in January

Marijuana sales surpassed $200 million in January, via the monthly report from the Michigan Cannabis Regulatory Agency. Michigan adult-use sales came in at $196,008,634, while medical sales came in at $11,295,443.

Why it Matters: Marijuana sales remain strong in Michigan, particularly for recreational use. However, there still are significant concerns about profitability and market over-saturation that the industry is contending with.

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  1. The Ins and Outs of Cottage Succession Planning in Michigan (Part One)

When purchasing a cottage, it’s often the intent of the owner to pass the cottage on to future generations to enjoy. Unfortunately, that vision may not become a reality due to challenges such as high property taxes, differing objectives among heirs and resulting family disputes that result in the cottage being sold upon the owner’s death.

Why it Matters: Common issues that prevent the passing of a cottage to future generations in Michigan can be addressed through careful cottage succession planning. Learn more from your Fraser Trebilcock attorney.

Related Practice Groups and Professionals

Labor, Employment & Civil Rights | Aaron Davis
Intellectual Property | Jared Roberts
Business & Tax | Robert Burgee
Cannabis Law | Sean Gallagher
Cottage Law | Mark Kellogg

DOL Issues Telework Guidance to Employers

As the modern workforce evolves, more and more employees are enjoying the flexibility of working from home, teleworking, or working away from the employer’s premises. These arrangements allow for greater work-life balance, increased productivity, and cost savings. However, as these teleworking arrangements become more common, it is important for both employers and employees to understand the protections and rights available under the law.

On February 9, 2023, the U.S. Department of Labor (DOL) issued a Field Assistance Bulletin (Bulletin) addressing several questions related to compliance with the Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA) when a business employs teleworkers. While Field Assistance Bulletins do not have the effect of law, they are nonetheless important statements of DOL policy and statutory interpretation.

The Bulletin explains that under the FLSA, employees who telework are entitled to compensation for all hours worked, including short rest breaks. In qualifying circumstances, employees are also entitled to take breaks to express breast milk free from intrusion and shielded from view. The Bulletin provides that the protections under the FLSA apply equally to employees who telework as to employees working at an office, factory, construction site, retail outlet, or any other worksite location. This means that teleworking employees are entitled to the same compensation and protection as employees working at a traditional worksite.

Similarly, under the FMLA, all hours worked are counted for purposes of determining an employee’s eligibility for leave. The Bulletin provides that when an employee teleworks from home consistently or in combination with working at another or various worksites, all of those hours count towards determining eligibility for FMLA leave. However, the determination of the worksite for an employee who teleworks is fact-specific and will be based on factors such as where the employee reports to work or the location where the employee’s assignments are made.

In conclusion, teleworking arrangements provide numerous benefits to both employees and employers. However, it is important to remember that these arrangements do not exempt employees from the protections and rights afforded to them by the FLSA and FMLA. While the Bulletin doesn’t have the force of law, it’s an important indicator of DOL policy regarding FLSA and FMLA enforcement. Employers and employees must be mindful of the protections and rights the DOL describes are due to telework employees to ensure that teleworking arrangements are fair and equitable for all parties involved.

For questions or assistance, please contact your Fraser Trebilcock attorney.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.


Aaron L. Davis is Firm Vice President and Treasurer, and Chair of Fraser Trebilcock’s labor law practice. You can reach him at adavis@fraserlawfirm.com or (517) 377-0822. 

Five Stories that Matter in Michigan This Week – February 24, 2023

  1. $35 Million in Grants Available for Small Nonprofits

The State of Michigan, Department of Labor and Economic Opportunity (LEO) and Michigan Nonprofit Association (MNA) have teamed up to help Michigan charities whose operations were impacted by the COVID-19 pandemic.

Why it Matters: Under this initiative, called the MI Nonprofit Relief Fund, grants in amounts between $5,000 and $25,000 will be awarded to selected entities with annual revenues total under $1 million. In addition, eligible entities must be based in Michigan and recognized by the IRS under Section 501(c)(3). Learn more.

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  1. Michigan Cannabis Regulatory Agency Suspends Licenses, Issues Advisory

The Michigan Cannabis Regulatory Agency (CRA) recently suspended the licenses of a marijuana processor and issued a safety advisory for items manufactured with “illicit product.”

Why it Matters: This action is an important reminder to marijuana businesses in Michigan that the CRA is active in regulating businesses and taking enforcement action when appropriate. TAS Asset Holdings is the second processor to have its license suspended by the CRA this month. The CRA also announced disciplinary action against 10 marijuana businesses on February 10.

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  1. CRA Publishes January 2023 Data, Average Price Drops

Per recent monthly data published by the Cannabis Regulatory Agency, the average retail flower price of an ounce of cannabis is $80.16, an all-time low, and almost a 50% decrease compared to last year’s average price of $152.74.

Why it Matters: While the prices of cannabis and cannabis-related products continue to decrease and make consumers happy, growers on the other hand are seeing profits decrease resulting in them seeking ways to halt new licenses to be granted in an effort to steady prices. Contact our cannabis law attorneys if you have any questions.

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  1. DOL Issues Telework Guidance to Employers

On February 9, 2023, the U.S. Department of Labor (DOL) issued a Field Assistance Bulletin (Bulletin) addressing several questions related to compliance with the Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA) when a business employs teleworkers.

Why it Matters: The Bulletin provides that the protections under the FLSA apply equally to employees who telework as to employees working at an office, factory, construction site, retail outlet, or any other worksite location.

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  1. ERISA Health and Welfare Plan Voluntary Audit Service

Fraser Trebilcock is excited to introduce our Health and Welfare Plan Voluntary Audit Service to help businesses ensure their health and welfare plans are compliant with the Employee Retirement Income Security Act (ERISA).

Why it Matters: ERISA is a complex set of regulations that governs employee benefit plans, including health and welfare plans. Failure to comply with ERISA can result in costly fines and penalties, not to mention damage to your company’s reputation. Learn more from your Fraser Trebilcock attorney.

Related Practice Groups and Professionals

Business & Tax | Robert Burgee
Cannabis Law | Sean Gallagher
Labor, Employment & Civil Rights | Aaron Davis
Employee Benefits | Robert Burgee

Five Stories that Matter in Michigan This Week – October 28, 2022

  1. Governor Whitmer Signs Bipartisan Election Bills

Governor Whitmer recently signed a package of election law bills which impact how clerks process ballots, including those coming from members of the military overseas. Michigan Public Act 195 permits clerks to pre-process absentee ballots two days prior to Election Day, changes requirements for ballot drop boxes to increase security, and requires clerks to more frequently review and update qualified voter files to remove dead voters. Public Act 196 allows military members serving overseas to submit ballots electronically.

Why it Matters: Polling shows that voters are highly energized and polarized leading up to the midterm elections. These laws are meant to address certain voting-related issues, such as ballot box integrity, that have led to controversy in the past. If you have questions about these bills, or election law issues in general, please contact a member of our election law team.

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  1. Department of Labor Issues New Proposed Rule on Independent Contractors 

The U.S. Department of Labor recently issued a Notice of Proposed Rulemaking that, if adopted, would change the standard for analyzing a worker’s classification as either an employee or independent contractor.

Why it Matters: Employee misclassification can result in severe financial consequences. Businesses and employers should remain diligent in analyzing their workers’ classifications. Learn more on the subject.

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  1. Michigan Court of Claims Rules in Prevailing Wage Policy Case

Judge Douglas Shapiro of the Michigan Court of Claims recently ruled in favor of the state’s Department of Technology, Management, and Budget (DTMB), when it implemented its prevailing wage policy. The Associated Builders and Contractors of Michigan (ABC) in July 2022 filed a preliminary injunction claiming that due to the 2018 repeal of Michigan’s prevailing wage law, that the state cannot require the wage rate, which the Court denied and agreed that DTMB did not violate separation of powers when implementing its prevailing wage policy.

Why it Matters: October 31 is the deadline for ABC to appeal the decision. If this decision stays, this signals changes to the way organizations do business with the state of Michigan. Learn more on DTMB’s prevailing wage.

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  1. New CRA Director Vows to Crack Down on Black Market Sales

This week, Brian Hanna, the Cannabis Regulatory Agency’s acting director, spoke to media and highlighted the agency’s focus on cracking down on cannabis that is continuing to illegally enter Michigan’s market.

Why it Matters: Though official numbers have not been confirmed, it is known that illicit cannabis is continuing to enter Michigan’s medical and adult-use cannabis markets, causing widespread effects on prices and profits for legal and law-abiding businesses.

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  1. State Court Administrative Office Proposes New Landlord-Tenant Rules

The State Court Administrative Office unveiled new proposed rules that if enacted, would alter the way eviction cases are handled for both landlords and tenants. Rules such as a requirement that tenants be served in person if a landlord wants an immediate default judgement, and the ability for tenants to get an automatic stay if they have applied for rental aid.

Why it Matters: If enacted, these rules would allow commercial and residential tenants more time to pay their landlords if they fall behind on payments, however landlords are against the new proposed rules as they believe it will make the process of finding new tenants more difficult.

Related Practice Groups and Professionals

Election Law | Garett Koger
Labor, Employment & Civil Rights | David Houston
Cannabis Law | Sean Gallagher
Real Estate | Jared Roberts

Department of Labor Issues New Proposed Rule on Independent Contractors

The US Department of Labor recently issued a Notice of Proposed Rulemaking that, if adopted, would change the standard for analyzing a worker’s classification as either an employee or independent contractor. The new rules are a reversion to prior tests, which consider certain “economic reality factors;” factors that were originally set out in a pair of cases before the Supreme Court of the United States in 1947 (See United States v. Silk, 331 U.S. 704, and Rutherford Food Corp. v. McComb, 331 U.S. 722).

The six non-exhaustive and unweighted factors flowing from those cases and included in this new rule are:

  • The worker’s opportunity for profit or loss depending on managerial skill;
  • The relative investment of the worker and the employer in the equipment, materials, or helpers required for their task;
  • The degree of permanence of the work relationship
  • Nature and degree of control – whether the employer has the right to control the manner in which the work is to be performed;
  • The extent to which the work performed is an integral part of the employer’s business;
  • Whether the service rendered requires a special skill or initiative.

These proposed rules are open for public comment until November 28, 2022.

Relatedly, the Internal Revenue Service recently “streamlined” its various “20 Factor” and other tests for independent contractor determination. See, IRS Publication, Topic No. 762. The Service now groups the prior multiple factors into three topics. The IRS Publication states the employer in making its determination, “must examine the relationship between the worker and the business. You should consider all evidence of the degree of control and independence in this relationship. The facts that provide this evidence fall into three categories – Behavioral Control, Financial Control, and Relationship of the Parties.” We add, however, that this “restatement” of IRS policy allows consideration of the prior “20 Factors,” or any others. While worker classification is likely to resolve similarly under DOL and IRS rules, the employer of course must consider both, lest it fall short in one regulatory arena or the other.

We all know that employee misclassification can result in severe financial consequences. Businesses and employers should remain diligent in analyzing their workers’ classifications and consult an experienced attorney with any questions. The attorneys at Fraser Trebilcock Davis & Dunlap, PC will continue to monitor these developments and stand ready to guide clients in their compliance with any new regulation.


Attorney David J. HoustonFraser Trebilcock Shareholder Dave Houston has over 40 years of experience representing employers in planning, counseling, and litigating virtually all employment claims and disputes including labor relations (NLRB and MERC), wage and overtime, and employment discrimination, and negotiation of union contracts. He has authored numerous publications regarding employment issues. You can reach him at 517.377.0855 or dhouston@fraserlawfirm.com.


Attorney Robert D. Burgee

Robert D. Burgee is an attorney at Fraser Trebilcock with over a decade of experience counseling clients with a focus on corporate structures and compliance, licensing, contracts, regulatory compliance, mergers and acquisitions, and a host of other matters related to the operation of small and medium-sized businesses and non-profits. You can reach him at 517.377.0848 or at bburgee@fraserlawfirm.com.

Client Alert: Broker & Consultant Fee Transparency to Group Health Plans

As the health care arena continues to evolve following the ACA and its progeny, one common theme in the regulations has been to increase transparency in the marketplace. Following on that theme, the Department of Labor recently issued its Field Assistance Bulletin No. 2021-03 aimed at the fees charged by group health insurance brokerages and consultants. The language of the Bulletin sets forth the Department’s short to medium term enforcement policy in regard to the amendments made to ERISA section 408(b)(2)(B), which was included as part of the Consolidated Appropriations Act of 2021 (CAA). Taken together, these documents set forth one method the Department will take to achieve the government’s goal of requiring group health plan sponsors, who are charged to act in a fiduciary capacity, to consider the costs of the services provided by certain vendors.

Who is affected?

ERISA section 408(b)(2)(B) applies to all group health plans, regardless of group size, and includes both insured and self-funded plans; all of which are “covered plans.” The sole exception applies to certain small employer health reimbursement arrangements.

The new language applies to “covered service providers” who provide plan related services to “covered plans.” Covered service providers include individuals and entities that enter into a contract or arrangement to provide one or more of the following services to a covered plan:

  • Brokerage services with respect to selection of:
    • Insurance products (including vision and dental);
    • Plan management services, vendors, and administrative supports; and
    • Stop-loss, pharmacy benefit, wellness, and other plan services.
  • Consulting services related to the development or implementation of:
    • Plan design, insurance or insurance product selection (including vision and dental);
    • Plan management services, vendors, group purchasing organization agreements, and services; and
    • Stop-loss, pharmacy benefit, wellness, and other plan services.

In addition to providing covered services, the broker, consultant, or other covered service provider must reasonably expect $1,000 or more in direct or indirect compensation in connection with its contract or arrangement with the covered plan.

Additionally, the Bulletin clarifies that only covered service providers who are a party to the contract or arrangement with the covered plan are required to make the disclosure. In this way, the amended statute does not require affiliates or subcontractors, solely by virtue of offering services to the covered plan as an affiliate or subcontractor of the covered service provider, to individually make the disclosures, as they will not have entered into the contract or arrangement with the covered plan.[1]

What information must be disclosed?

Covered service providers must disclose to covered plans specified information regarding the services to be provided and the compensation the covered service provide reasonably expects to receive in connection with its services. At a minimum, this information must include:

  • A description of the services to be provided by the covered service provider;
    • Including, where applicable, information about those services for which the covered service provider will provide or reasonably expects to provide services directly to the covered plan as a fiduciary.
  • A description of the direct compensation that the covered service provider expects to receive in connection with the contract or arrangement with the covered plan. In most instances, such direct compensation will include some form of commission.
  • A description of all indirect compensation that the covered service provider, its affiliates, or subcontractors expect to receive.
    • Where a covered service provider employs the use of affiliates, subcontractors, or both, the disclosure should also include a description of the arrangement between the covered service provider and the affiliate or subcontractor.
    • Indirect compensation disclosures should also include (1) an identification of the services for which such indirect compensation will be received, (2) any formulae relied up in the calculation of such indirect compensation,  (3) identification of the payer of such indirect compensation, and (4) a description of the arrangement and any formula amongst and between the payer of the indirect compensation and the covered service provider, affiliates, or subcontractors.
  • A description of any compensation the covered service provider expects to receive in connection with the termination of the contract, along with a calculation of how any prepayments will be calculated and refunded.

In addition to describing the types of compensation, the covered service provider notice should also include the manner in which such compensation will be received.

Finally, a covered service provider must set forth the services that the covered service provider is rendering to the covered plan as a fiduciary.

When are the disclosures required?

The CAA amendments became applicable on December 27, 2021. Covered service providers, therefore, are required to make their fee disclosures for any new contracts or arrangements as of that date. The Bulletin clarifies that the “effective” date of the contract or arrangement is the date the contract or arrangement was executed, which may not necessarily be the beginning of a new plan year. Therefore, covered plans should consult with and collect the requisite information from their covered service providers for any contracts or arrangements that are written, renewed, or extended in 2022.

Furthermore, in order to meet the objectives of the policy (i.e. allowing covered plans to perform cost-benefit analysis related to the fees charged and services provided by their brokers and consultants), covered service providers are required to make the disclosures set forth above “reasonably in advance” of the date on which the contract or arrangement is entered into, extended, or renewed. Furthermore, any change in such disclosures are required to be made as soon as practicable.

How does a covered plan ensure disclosure?

While the disclosures contemplated by the statutory provision are intended to come from the covered service provider, the fiduciary responsibility rest with the covered plan sponsor. The primary enforcement mechanism, therefore, is to deem nonconforming deals to be prohibited transactions under the statute. However, no such determination shall be made provided covered plans meet the following requirements:

  • “The responsible plan fiduciary did not know that the covered service provider failed or would fail to make required disclosures and reasonably believed that the covered service provider disclosed the information required to be disclosed.
  • The responsible plan fiduciary, upon discovering that the covered service provider failed to disclose the required information, requests in writing that the covered service provider furnish such information.
  • If the covered service provider fails to comply with a written request…within 90 days of the request, the responsible plan fiduciary notifies the Secretary of the covered service provider’s failure…”

Conclusion

As plan fiduciaries consider their options this year, whether its with a new carrier or a renewal, they should begin working with their brokers and consultants to gain a better understanding of the fees that are charged and prepare to answer inquiries about the reasonableness thereof.

[1] Affiliates and subcontractors should review the nature of their relationship to covered plans to ensure that their services do not extend beyond the scope of the services provided on behalf of a covered service provider, thus possibly triggering the need for the affiliate or subcontractor itself to disclose.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.


Robert D. Burgee is an attorney at Fraser Trebilcock with over a decade of experience counseling clients in business transactions, civil matters, regulatory compliance, and employee matters. Bob also has a background in employee benefits, having been a licensed agent since 2014. You can reach him at 517.377.0848 or at bburgee@fraserlawfirm.com.


Aaron L. Davis works in employee health and welfare benefits. He is also Chair of the firm’s labor law practice and serves as Firm Secretary. He has litigation experience in a diverse range of employment matters, including Title VII, the Age Discrimination and Employment Act, the Americans with Disabilities Act, the Family Medical Leave Act, and the Fair Labor Standards Act. You can reach him at 517.377.0822 or email him at adavis@fraserlawfirm.com.