By Howard M. Wagner, Partner, National Tax Services at Crowe Horwath

Originally published at www.crowehorwath.com

The Tax Cuts and Jobs Act (TCJA) eliminates the deduction for business-related entertainment expense for amounts incurred or paid after Dec. 31, 2017. The TCJA also modifies the rules for deducting meals.

Entertainment Expenses

The TCJA eliminates the deduction for entertainment expenses, including activities such as taking a client or a prospect to sporting events, the theater, movies, concerts, and amusement parks. The act also eliminates deductions for expenses incurred for entertainment facilities (for example, a stadium suite or skybox) and for amounts paid for membership in any club organized for business, pleasure, recreation, or social purposes. The deduction for meals purchased during entertainment activities also is eliminated.

However, employers still can fully deduct entertainment expenses included in employee W-2 wages or paid under certain reimbursement arrangements. In addition, they still can fully deduct expenses, including meals, incurred for recreational, social, or similar activities primarily for the benefit of employees, such as expenses incurred for an annual holiday party or summer outing.

Meal Expenses

Businesses are allowed a 50 percent deduction for amounts paid for meals associated with the active conduct of the taxpayer’s trade or business. However, two changes made by the TCJA affect business meals.

First, a definition for “business meal” was removed, and meals provided to employees traveling still are 50 percent deductible. Second, beginning on Jan. 1, 2018, the cost of meals provided for the convenience of the employer, such as meals provided to employees who need to be available throughout the mealtime, are 50 percent deductible. Prior to tax reform, such meals were fully deductible. TCJA also expands the definition of meals for the convenience of the employer subject to the 50 percent limitation to include meals provided in the employer’s on-site dining facility. However, beginning on Jan. 1, 2026, no deduction will be allowed for meals for the convenience of the employer and for the cost, including meals, of operating an on-site dining facility.

Based on recent public comments from IRS officials, the following is a reasonable understanding of the deductibility allowance of business meals until additional guidance, if any, is promulgated:

Items to Consider

Businesses should keep in mind a few things when reviewing their 2018 meals and entertainment policies. Because the effective date of the law change is based on expenses incurred after Dec. 31, 2017, the new rules apply now without regard to the company’s year-end. Fiscal year taxpayers therefore will need to adjust their policies. Businesses also should consider the impact of the new law on sponsorship arrangements, charitable events, and similar activities. Sponsorship arrangements often include suites or game tickets in addition to advertising benefits. Under the TCJA, the portion of a sponsorship agreement allocable to suites or game tickets will be nondeductible instead of 50 percent deductible. The remainder of the sponsorship agreement will continue to be deductible as an advertising expense.

Finally, the cost of charitable sporting events (such as a charity golf outing) typically involves two components: the cost of the golf and meals and the charitable contribution for amounts paid in excess of that amount. Before tax reform, the cost allocable to golf and meals was fully deductible. Beginning in 2018, the cost of meals and golf will not be deductible. The charitable contribution will continue to be deductible.

Dear Fellow Dealer:

I’m pleased to bring you some particularly good news for your business and your customers. Earlier today at the White House, President Trump signed into law S.J.Res. 57, a joint resolution disapproving the Consumer Financial Protection Bureau’s (CFPB) 2013 auto lending guidance. As you are aware, this flawed guidance attempted to pressure lenders to eliminate a dealer’s ability to discount loans, which would have been bad for our businesses, and worse for our customers!

In 2013 when the CFPB’s guidance was first issued, it was abundantly clear that the agency was trying to limit the discounts on auto loans that you can offer your customers, such as meeting a customer’s competing loan offer or monthly budget amount. In fact, many industry “experts” said that dealer reserve largely would be eliminated within six months. But NADA and dealers across the country didn’t throw in the towel – we fought back with facts and data.

Congress stepped in soon after the guidance was issued, because Congress has precluded the CFPB from regulating auto dealers. Also, the guidance was issued behind closed doors, without any public feedback at all. Extensive congressional oversight revealed the many problems with the CFPB’s approach. Independent analysis showed that the bureau’s methods were off by as much as 41 percent. Even worse, the CFPB never studied how the guidance might reduce competition, raise the cost of auto credit, or harm car and truck buyers.

Although it took five years, we never gave up. As a direct result of NADA’s sustained efforts, dealer reserve is still intact today. While dealers still need to maintain compliance with fair lending laws, the CFPB’s guidance that threatened to disrupt the auto finance market for dealers and our customers has been eliminated. In fact, with S.J.Res. 57 now the law of the land, the CFPB’s guidance is nullified as if it never existed, and the bureau is barred from issuing new guidance that is “substantially the same.”

President Kennedy once said, “Victory has a thousand fathers, but defeat is an orphan.” Our success truly does have a thousand parents, as countless dealers across the nation urged Members of Congress to help preserve a consumer’s ability to receive a discounted auto loan from a dealer. While NADA led this effort, our victory shows the value of vigilant, organized and informed dealers. Thank you for the essential role that you played in this effort. When dealers come together in Washington, not only do dealers win, but so do our 1.1 million employees and the tens of millions of customers we proudly serve.

Our voices were heard, and Washington actually worked for a once. The pro-consumer, pro-small business position prevailed!

Sincerely,

Wes Lutz
NADA Chairman

To the relief of employers across the country, the Supreme Court today ruled in a 5-to-4 decision that class action waivers in employment arbitration agreements do not violate the National Labor Relations Act (NLRA) and are, in fact, enforceable under the Federal Arbitration Act (FAA). The decision in the three consolidated cases—Epic Systems Corporation v. Lewis; Ernst & Young, LLP v. Morris; and NLRB v. Murphy Oil USA, Inc.—maintains what had long been the status quo and halts the National Labor Relations Board’s (NLRB’s) crusade to invalidate mandatory class waivers. What do employers need to know about today’s monumental decision, and what adjustments can you make to capitalize on the Court’s ruling?

How We Got Here

The FAA (1925) and the NLRA (1935) are decades-old statutes, each playing a major role in the relationship between employers and employees. The FAA broadly encourages private dispute resolution through arbitration, while the NLRA protects employees (not just union members) who engage in “concerted activities” for “mutual aid or protection” in the workplace. For 77 years, the FAA and the NLRA peacefully coexisted, and nobody— including the NLRB —found anything incompatible about the NLRA and bilateral arbitration agreements.

In January 2012, however, the NLRB took a radical step when it ruled that an employer violated Section 7 of the NLRA by requiring employees to sign arbitration agreements waiving their rights to pursue class and collective claims in all forums (D.R. Horton). Although agreements requiring employees to submit class or collective claims on an individual basis to an arbitrator instead of a court have become increasingly commonplace in today’s workplaces, the NLRB reasoned that “the collective pursuit of workplace grievances through litigation or arbitration is conduct protected by Section 7” of the NLRA. Therefore, according to the Labor Board, any restriction on that right – such as through a mandatory class waiver agreement – would violate the NLRA.

That decision was overturned by the 5th Circuit Court of Appeals in 2013, and employers once again felt comfortable requiring employees to agree to class waiver agreements. But that all changed in 2016, when the 7th Circuit Court of Appeals overturned established precedent with its decision in the Epic case. The court essentially adopted the NLRB’s position that class and collective action waivers violate Section 7 of the NLRA, opining that there is nothing quite so “concerted” as a piece of class or collective action litigation, where employees band together to collectively assert a legal challenge to a workplace practice. Several months later, the 9th Circuit Court of Appeals followed suit with its own ruling in the Morris case and became the second court to adopt the NLRB’s position.   

Meanwhile, a number of other circuit courts maintained the position that the FAA and the NLRA did not conflict with each other, permitting mandatory class waivers. These included the 5th Circuit Court of Appeals (in the Murphy Oil case), the 2nd Circuit, and the 11th Circuit. That led to a classic circuit split, creating a patchwork of differing standards on the same issue across the country. This caught the attention of the Supreme Court, which accepted the Epic, Morris, and Murphy Oil cases and agreed to wade in to resolve the debate once and for all.

Supreme Court: The NLRB Doesn’t Prevent Mandatory Class Waivers

All three cases essentially asked the same question: does an employment arbitration agreement containing a class and collective action waiver violate the NLRA, or are they permitted by virtue of the FAA? Today, the Court ruled that the right to bring a joint, collective, representative, or class-based claim is not considered a “concerted action” as understood and protected by the NLRA, and therefore the labor statute does not bar any agreement requiring arbitration instead of any such claims.

While the NLRA declares unenforceable contracts in conflict with its policy of protecting workers’ “concerted activities for the purpose of collective bargaining or other mutual aid or protection,” the Court’s majority opinion (written by Justice Gorsuch) held that this does not conflict with Congress’s directions favoring arbitration. Specifically, the Court ruled that the right to bring a claim, whether jointly—such as two individuals together in one action—or in a class action is not the kind of “concerted activity” protected under the NLRA’s detailed regulatory scheme. Although the workers challenging the agreements argued that such activity is a quintessential example of banding together to gain strength in numbers, which is exactly the type of concerted activity that should be protected by the NLRA, the Court disagreed.

Further, the Court rejected the employees’ argument that the FAA’s “saving clause” (which allows contract defenses to defeat arbitration agreements) allows the NLRA to invalidate arbitration agreements. “The saving clause recognizes only defenses that apply to ‘any’ contract. In this way the clause establishes a sort of ‘equal-treatment’ rule for arbitration contracts.” In other words, the only arguments available to employees to defeat the enforcement of arbitration agreements are those arguments that could defeat the enforcement of other types of contracts outside the world of arbitration.

In short, the Supreme Court held that Congress meant what it is said in the FAA: “Congress has instructed federal courts to enforce arbitration agreements according to their terms—including terms providing for individualized proceedings.” Thus, the majority found no conflict but instead harmony between the two federal statutes: “The NLRA secures to employees rights to organize unions and bargain collectively, but it says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum.”

The employers defending the agreements argued that bringing litigation as a class “is not a substantive right” under Section 7, and thus it should not be a violation of the NLRA when an employer requires employment disputes be resolved through individual arbitration. Today, the Court agreed, finding Section 7 focuses on the right to organize unions and bargain collectively. The statute’s silence on the issue of arbitration, especially when examined together with federal policy favoring arbitration and the Court’s long-line of precedent repeatedly upholding the parties’ election to proceed in the arbitral forum, means that today’s decision comes as both no surprise and relief.

What This Means For Employers: You Can Feel Secure Requiring Class Waivers

This ruling should provide you comfort knowing you may continue to incorporate and enforce mandatory class action waivers in your employment arbitration agreements. If you have developed arbitration agreements with “opt-out” provisions, fearing that a blanket mandatory requirement might be one day held unenforceable, you may want to revisit your agreements with your employment counsel with this decision in mind. Although traditional contract defenses (such as unconscionability) can still make your agreement unenforceable, and state laws may provide for varying standards, today’s decision should provide a level of comfort when it comes to drafting, enforcing, and defending your arbitration agreements.

If you need assistance reviewing your arbitration agreements to ensure they meet the new standards set by the Supreme Court, or crafting new agreements to address the viability or wisdom of an “opt-out” route, please contact your Fisher Phillips attorney.

 This Legal Alert provides an overview of a specific Supreme Court decision. It is not intended to be, and should not be construed as, legal advice for any particular fact situation.

By George Nenni, Generations Digital

Each time I get fresh access to a dealer’s Google Analytics, I hold my breath in anticipation of what the results will look like.  My first task it to look at the dealer’s high-level traffic report, inspecting the volume and quality of website visitors they receive from organic search, paid search, social media, etc.  A common disappointment is when I see a large chunk of untagged, mis-tagged, ill-tagged, mal-tagged traffic, as I know the dealer may be dealing with an unsophisticated agency, and I’ve got my work cut out for me.  

If my goal is to measure the effectiveness of a dealer’s digital marketing campaign, I must first make sure the incoming traffic is properly identified.  A large portion of the traffic typically categorizes itself.  Items such as paid search, organic search (most of it) and organic social typically lands in the proper channel to identify it.  The problem arrives when third party agencies are running campaigns, but don’t have a good understanding how to properly tag the traffic they are driving to the dealer’s website.  The tool they use are UTM (Urchin Tracking Module) codes, and the lack of a deep understanding can make it very challenging for dealers to inspect their incoming campaign.  UTM codes are simply suffixes that append to the end of a normal URL, helping analytics tools understand where the traffic came from. UTM codes may sound complicated, but they are definitely not. However there are specific rules, syntax that must be followed or problems will arise.  There are two main categories of problems the agencies create: 1) Not understanding how Google prescribes these codes to be used, resulting in 100% of the agency traffic going into the Other channel (miscellaneous file) 2) Taking shortcuts and not tagging each specific campaign, making it nearly impossible to determine which campaigns are working.  Worst case scenario (see screen shot below), the Other Channel is the dealer’s largest traffic category.

The good news is, the mechanics of fixing the problems are very easy.  The bad news is, it can be an uphill battle with non-responsive agencies. These agencies wonder why I care so much that their traffic is being filed in the miscellaneous drawer, is it really hurting anything?  I simply respond that my goal is to help the dealership determine which digital marketing channels are offering the best ROI, and without properly tagging, my only advice for the dealer is to choose a more sophisticated provider. The most common agency culprits are traditional media companies who are also offering digital services.  While I hate to generalize, I would say across the board newspapers, cable companies, television and radio stations all deliver digital campaigns that are improperly tagged, or not tagged at all. They are providing the dealer with high level reporting from their back-end systems, that does not seek to inspect the traffic downstream into the website.  But traditional agencies are not alone.  What is even more surprising is that many large automotive digital-only agency players also suffer from same issues, lack of understanding how to properly tag campaigns, and low willingness to make things right.

These agencies should not just take my word for it, they should read the published standards by Google, or better yet, the published automotive standards by PCG (http://www.pcgresearch.com/google-utm-guide/).  I’m not saying PCG’s standards are perfect, but I haven’t heard anyone else trying to bring organization to this process, so I applaud them for putting some standards out there.  In addition, one of the best investments these agency teams could take is attending a training course on to inspect website traffic using Google Analytics.  Google offers online certification classes for a great overall understanding (https://analytics.google.com/analytics/academy/). Better yet here is a free plug for my friend Brian Pasch, attend either his online classes, or his onsite Google Analytics training next month in New Jersey (https://www.pcgtraining.com/google-analytics-skill-building-certification-nj/).  I’ve attended each of these, and highly recommend.

Let’s face it, informed and proactive dealers are grabbing the wheel today on the attribution bus and inspecting their campaigns themselves using Google Analytics. These dealers produce their own reports showing which campaigns are working and which ones are not and comparing these reports to the ones provided by the agencies.  These agencies need to wake up and realize that if they don’t understand how their campaigns will be measured going forward, they will be the first vendor dropped by the informed dealer.

I hope you have found this information helpful.  If you are an automotive retailer, don’t miss the upcoming seminar at the GCADA Learning Center. This seminar will explore how to make the best decisions on digital marketing investment and measuring return on investments from this spending. After the seminar, all attendees will have the opportunity to receive a complimentary digital marketing audit, including analyzing your paid search and social media spending. RSVP at www.gcada.net/lc-digital.

You can also follow me on these social networks:

Linkedin: linkedin.com/in/georgenenni

Facebook: facebook.com/generationsdigital/

Twitter: twitter.com/generationsdig

Both Ohio and the Federal law regulate the employment of minors, and the regulations vary depending on the minor’s age and when school is in session. The Fair Labor Standards Act (FLSA) and its Ohio equivalent extend protection to children by prohibiting the employment of “oppressive child labor” in commerce. The following guidelines must be considered when employing a minor at your dealership.

Significantly, a “minor” is anyone under the age of 18. With rare exceptions, the employment of any person under the age of 14 is prohibited. In general, the law regulates the hours of work and tasks performed. And in each case, the law applies a different standard depending upon the child’s age.

Hours of Work (Federal and Ohio Law)

Employment of persons 14 and 15 years of age is confined to:

• Hours outside of school hours;
• Not more than 40 hours in any week when school is not in session or not more than 18 hours in any week when school is in session;
• Not more than 8 hours on any day when school is not in session or not more than 3 hours in any school day;
  Not before 7:00 a.m.;
• Not after 9:00 p.m. from June 1 to September 1 or during any school holiday of 5 school days or more; or not after 7:00 p.m. any other time.

Employment of persons 16 or 17 years of age is confined to:

• After 7:00 a.m. on any day that school is in session, except such person may be employed after 6:00 a.m. if the person was not employed after 8:00 p.m. the previous night; and
• Before 11:00 p.m. on any night preceding a day that school is in session.

Rest Period

Employees under the age of 18 must be given a rest period of at least 30 minutes for every five consecutive hours of work. The rest period need not be included in the computation of the number of hours worked by the minor.

Type of Work Permitted

Dealers and owners considering the employment of a minor need to know what kind of work a minor can perform.
Minors that are 14 or 15 years old can perform non-hazardous work in retail and gasoline service establishments that involve:

• Office and clerical work including selling and cashiering;
• Working a counter and picking and packing orders (as long as it does not involve the use of power driven machinery);
• Performing clean up and maintenance work both inside and outside the dealership (as long as it does not involve the use of power driven mowers and cutters. The use of vacuum cleaners and floor polishers is allowed);
• Car washing, cleaning, and polishing; and
• Dispensing gasoline and oil (as long as it does not involve the use of lifts, pits, racks, or other similar apparatus). Under Ohio law, youth under the age of 16 are expressly prohibited from performing work in connection with cars and trucks involving the use of pits, racks or lifting apparatus or involving the inflation of any tire mounted on a rim equipped with a removable retaining ring.

If an occupation is not specifically permitted by regulation, it is prohibited for youth ages 14 and 15.

The FLSA and its companion Ohio regulations specifically contain strict prohibitions against the employment of any individual under the age of 18 in “hazardous occupations.”

The following activities, though not an exclusive list, are deemed to be hazardous for all individuals under 18 within the meaning of this prohibition:

• Occupations in the operation of power driven metal forming, punching and shearing machines;
• Occupation in the operation of circular saws, band saws and guillotine shears;
• Using power-driven hoisting apparatus; and
• Wrecking and demolition operations.

Motor vehicle drivers and outside helpers on any public road or highway are deemed “hazardous” and are generally prohibited for individuals under the age of 18.

However, Ohio and Federal law do have exceptions to this general prohibition and some limited on-the-job driving may be performed by 16-year olds and qualified 17-year olds. There are some specific rules for both 16-year and 17-year olds. Also, there are some additional general regulations for any minor operating a vehicle as of a part of their occupation.

16-Year Old Federal Driving Rules

Licensed 16-year olds may be hired for jobs involving vehicle operation on private property, but not on public roadways. Therefore, they may move vehicles on dealership premises provided the criteria mentioned below are met.

17-Year Old Federal Driving Rules

17-year olds may drive on public roads while on the job so long as these provisions, along with those mentioned below, are adhered to:

• The driving does not involve route deliveries or route sales; the transportation for hire of property, goods, or passengers’ urgent, time-sensitive deliveries or the transporting at any one time of more than three passengers, including the employees of the dealership. Do not hire 17-year olds exclusively as parts delivery drivers.
• The driving performed by the minor does not involve more than two trips away from the primary place of employment in any single day for the purpose of delivering goods of the minor’s employer to a customer (except urgent, time-sensitive deliveries which are completely banned).
• The driving performed by the minor does not involve more than two trips away from the primary place of employment in any single day for the purpose of transporting no more than three passengers (other than the employees of the employer).
• The driving takes place within a thirty-mile radius of the minor’s place of employment.
• The minor has no records of any moving violation at the time of hire.
• The driving is only occasional and incidental to the employee’s employment.
  o The term “occasional and incidental” is defined by Federal regulations as no more than one-third of an employee’s work time in any workday and no more than twenty percent of an employee’s work time in any workweek.

Additional Ohio and Federal Driving Rules

For any 16 or 17-year old, the following additional Ohio and Federal guidelines must be adhered to:

• The automobile or truck the minor is driving does not exceed 6,000 pounds gross vehicle weight.
• The vehicle is equipped with a seat belt or similar restraining device for the driver and for any passengers.
• The employer has instructed the employee that such belts or other devices must be used.
• The driving is restricted to daylight hours.
• The minor must hold a state license valid for the type of driving involved in the job performed and has no record of any moving violations at the time of hire.
• The minor has successfully completed a state-approved driver education course.
• The driving does not involve the towing of vehicles.

Remember, there is no exemption within the teen driving rules for family members who are employed by the dealership.

At the time of application, require prospective teen employee/drivers to sign waivers authorizing driving record and education background checks. Let prospective employee drivers know when they apply for employment that they must sign a written certification indicating compliance with the criteria listed above, if hired. Include in the certification a statement that any falsification or omission of information may result in termination. Keep a completed certification in employee personnel files. For teenage employee/drivers, certifications also should state they have been instructed to wear safety belts. Also, be sure to check with your insurance carrier regarding coverage. Finally, dealers should maintain logs of all driving done by teen drivers to ensure compliance with the regulations.

Proof of Age & Wage Agreemen

A dealership cannot provide employment to a minor without agreeing with the minor as to the wages or compensation the minor will receive for each day, week, month, or year; or per piece, for work performed. Dealerships must have a written agreement with the minor regarding these terms. The original agreement should be retained at the dealership, with a copy given to the minor and their parent/guardian (dealerships are advised to have the parent/guardian sign-off on the wage agreement as well). On or before each payday, the dealership must provide the minor with a statement of the earnings due and the amount to be paid. A dealership must not reduce the wages or compensation of any minor without giving notice at least twenty-four hours previous to the reduction, at which time a written agreement must be entered into with the minor as in the case of original employment.

A dealership cannot retain or withhold from a minor the wages or compensation, or any part thereof, agreed to be paid and due the minor for work performed or services rendered because of presumed negligence or failure to comply with rules, breakage of machinery, or alleged incompetence to produce work or perform labor according to any standard of merit.

A dealerships cannot receive a guarantee, bonus, money deposit, or other form of security to obtain or secure employment for a minor or to ensure faithful performance of labor, guarantee strict observance of rules, or make good losses which may be charged to the minor’s incompetence, negligence, or inability.

Age and Schooling Certificate

Also known as work permits, all minors who are in paid employment must have valid age and schooling certificates during the school year; and, 14-year and 15-year olds must have valid age and schooling certificates at all times of the year. Minors aged 16 and 17 are not required to provide an age and schooling certificate during summer vacation months but they are required to provide proof of age and a statement signed by the minor’s parent or guardian consenting to the proposed employment.

Recordkeeping Requirements

The dealership must keep a time book or other written records which state the name, address, and occupation of each minor employed, the number of hours worked by such minor on each day of the week, the hours of beginning and ending work, the hours of beginning and ending meal periods, and the amount of wages paid each pay period to each minor.

Posting Requirements

The dealership must maintain a list of all minors employed or being trained. This list must be posted on the dealership premises along with the Ohio Employment of Minors Law poster: http://www.com.ohio.gov/documents/laws_MLLPoster.pdf. These postings should be placed in plain view in a conspicuous area which is frequented by the largest number of minors and to which all minors have access.

This summary provides an overview of Ohio and federal laws. It is not intended to be, and should not be construed as, legal advice for any particular fact situation. For questions related to the employment of minors, contact your Fisher Phillips attorney at 440-838-8800.